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Trade deficit swells to record ¥2.79 trillion on surging imports

AFP-JIJI

The nation’s trade deficit swelled in January to another monthly record, data showed Thursday, as once-bumper surpluses disappear under the weight of soaring post-Fukushima energy bills, an imbalance driven by Prime Minister Shinzo Abe’s cheap-yen policies.

The ¥2.79 trillion shortfall also underscored a boost in purchases of foreign goods ahead of an April sales tax rise, analysts said, as fears grow that the hike will derail a recovery in the world’s third-largest economy.

Japan’s yawning deficit marked the latest worrying news after its sizzling GDP growth in the first half of last year slowed to a crawl in the fourth quarter, and as it posted a record trade deficit through 2013.

The yen has lost about a fifth of its value against the dollar since late 2012, owing to a policy blitz dubbed “Abenomics,” which meshes government spending with massive central bank monetary easing — a plan aimed at reviving the long-lumbering economy.

While the weaker currency boosts exporters’ profitability, it also makes goods purchased from overseas more expensive.

The growing imbalance was stoked by a 25 percent jump in January imports to a record ¥8.04 trillion on pricey bills for oil and gas purchases, after Japan shuttered its nuclear reactors amid the worst atomic crisis in a generation at Fukushima in 2011.

But the monthly volume of energy imports has been slowing, with January’s rise also driven by stronger spending ahead of the tax rise, which is seen as crucial to bringing down eye-watering national debt, said London-based Capital Economics.

“The most recent increase in imports can largely be attributed to strong domestic demand ahead of the upcoming sales tax hike, and a narrowing in the shortfall seems likely after April,” it added.

Despite upbeat exports to key markets in the United States, China and Europe, the January deficit ballooned by 70.8 percent from a year earlier and was equal to about one-quarter the country’s trade deficit through all of 2013.

Exports rose 9.5 percent to ¥5.25 trillion, partly driven by a jump in shipments of vehicles, but the value of shipments overseas lagged the sharp drop in the yen, Nomura Securities Co. said.

“Japanese companies have probably not benefited fully from the depreciation,” it said in a report.