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Import slowdown narrows trade gap

Bloomberg

The trade deficit shrank in April as imports rose the least in 16 months, after the consumption tax hike crimped consumer spending, Finance Ministry data showed on Wednesday.

Inbound shipments rose 3.4 percent from a year earlier, the ministry said. Exports increased 5.1 percent, leaving a deficit of ¥808.9 billion, down 7.8 percent from a year earlier.

Reductions in the trade deficits, which extended their record run to 22 months, would help Prime Minister Shinzo Abe’s efforts to drive a sustained economic recovery and an exit from deflation. So far, export gains have been limited, even with a 17 percent slide in the yen against the dollar since Abe took office in December 2012.

“Imports boosted by front-loaded demand before the consumption tax hike dropped off in April,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute. “We have to wait for exports to recover strongly before we will see a real drop in the trade deficit and that situation is still way out of sight,” said Shinke, the most accurate forecaster of the economy for two years running in data compiled by Bloomberg.

The trade shortfall was wider than a ¥646.3 billion gap forecast in a survey of 29 economists by Bloomberg News.

Abe increased the sales tax to 8 percent from 5 percent as he tries to contain the world’s biggest debt burden. An environmental tax on energy, which also took effect April 1, undercut imports of oil and coal, according to Nomura Holdings Inc. economists led by Minoru Nogimori.

Exports are likely to increase moderately once overseas economies improve and the effects of temporary factors such as U.S. winter weather abate, Bank of Japan Gov. Haruhiko Kuroda said last week.

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