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Japan’s 2015 trade deficit narrows as oil prices tumble

Kyodo

Japan logged a trade deficit in 2015 for the fifth straight year, but its value shrank 77.9 percent from 2014 to ¥2.83 trillion ($23.9 billion), due mainly to a sharp drop in imports amid lower crude oil prices, the government said Monday.

The value of exports rose 3.5 percent to ¥75.63 trillion, due partly to increased automobile exports to the U.S., while imports fell 8.7 percent to ¥78.46 trillion, the Finance Ministry said in a preliminary report.

The deficit saw the first decline since the massive March 2011 earthquake and tsunami devastated the Tohoku region. In 2014, the deficit totaled ¥12.82 trillion, a record high since comparable data became available in 1979.

Crude oil imports slid 41.0 percent as average prices dropped 47.4 percent from the previous year to $55.0 per barrel. Imports of liquefied natural gas decreased 29.5 percent.

Crude oil prices have a major impact on Japan’s trade balance, as the country relies heavily on energy imports. This has especially been the case since safety concerns in the wake of the March 2011 Fukushima nuclear disaster forced the country’s commercial reactors offline. Most remain shut down.

“The deficit is likely to decline further as crude oil prices remain low,” said Yuichiro Nagai, an economist at Barclays Securities Japan Ltd. But prospects of exports remain unclear as their expansion depended mainly on solid auto exports, Nagai added.

“The trade balance appears to be improving due to a sharp drop in imports, but there are not many products that serve as an engine for export growth,” Nagai said.

In volume terms, exports fell 1.0 percent in 2015, indicating the value of exports was boosted by a weaker yen. A weak yen usually supports exports by making Japanese products more competitive abroad and boosts the value of overseas revenues in yen terms.

The yen plunged against the U.S. dollar by 14.9 percent from 2014 to 121.00, according to the ministry.

Japan’s shipments to the United States grew 11.5 percent to ¥15.22 trillion on the back of robust vehicle exports, while imports expanded 6.8 percent to ¥8.05 trillion.

Exports to China, another major destination for Japanese products, dropped 1.1 percent to ¥13.23 trillion, reflecting a drop in automobiles amid the slowdown in the Chinese economy, while imports rose 1.3 percent to ¥19.42 trillion.

Exports to the European Union climbed 5.3 percent to ¥7.99 trillion and imports from the 28-nation bloc rose 5.6 percent to ¥8.62 trillion.

The figures were measured on a customs-cleared basis.

In December alone, the trade balance stood at a surplus of ¥140.2 billion following a deficit in November, with exports falling 8.0 percent on year to ¥6.34 trillion and imports sliding 18.0 percent to ¥6.20 trillion.