Japan posted its biggest trade surplus in over four years in February, thanks to a strengthening in the yen and weak oil prices, though both imports and exports fell, suggesting persistently slack demand both here and overseas.
Preliminary data reported Thursday showed exports fell 4 percent from a year earlier to ¥5.7 trillion ($50.5 billion) in February and imports dropped 14 percent to ¥5.46 trillion ($48.4 billion).
The resulting ¥242.8 billion ($2.2 billion) surplus compares with a deficit of ¥426 billion a year earlier and a deficit of ¥648.8 billion in January. It was the biggest surplus since September 2011.
Surging oil and gas imports from the nuclear plant closures sparked by the March 2011 Fukushima disaster have pushed the country from perennial surpluses into deficits. A weaker yen accentuated those costs, but the prolonged slump in crude oil prices has alleviated some of the high cost of energy imports.
With the finance ministry pricing exports in yen, the weakening of the currency, driven by Prime Minister Shinzo Abe’s reflationary policy, inflated export values in 2015. That advantage is now fading as the yen has strengthened about 6.5 percent this year.
“The tailwind from the weak yen has gone. We can’t help but hold a pessimistic view on the outlook for exports,” said Atsushi Takeda, an economist at Itochu Corp. in Tokyo, before the figures were released. “Domestic demand won’t be dependable at all, and the same goes for exports. I can’t deny the possibility of another economic contraction this quarter.”
By region, imports from the Middle East, the source of most of Japan’s oil and gas, fell 35 percent in February from a year earlier.
Exports to the United States, its biggest export market, edged up 0.2 percent while imports from the U.S. climbed 5 percent, leaving a trade surplus of ¥604.1 billion ($5.4 billion).
Japan’s exports to China rose 5 percent, while its imports from China plunged nearly 21 percent. Its deficit with China fell by 50 percent, to ¥382.4 billion ($3.4 billion).
The weakness in overseas demand was spread across industries, as exports of machinery, electronics and chemicals fell, while vehicle exports, which account for a quarter of the total, rose only 0.9 percent.
The economy shrank in the final three months of 2015, for the fifth quarterly contraction since Abe returned as prime minister in December 2012. The gross domestic product declined by an annualized rate of 1.1 percent, and falling private consumption was the biggest drag on the economy. Economists are pointing to growing risks of another GDP decline for the first quarter of 2016.
“The lack of a boost from exports raises a risk of Japan’s contraction this quarter,” said Nobuyasu Atago, the chief economist at Okasan Securities Co. and a former Bank of Japan official. “It’s becoming clearer that the weakness of the global economy is taking a toll on Japan’s economy.”