Japan's record trade deficit adds to sinking consumer confidence and an April consumption tax increase, threatening to undermine Prime Minister Shinzo Abe's bid to engineer a sustained recovery.
Credit Suisse Group AG on Thursday cut its 2014 economic growth forecast for Japan to 1.6 percent from 2.2 percent, as the government reported a ¥2.79 trillion trade shortfall for January. The full-year deficit for 2013 was an unprecedented ¥11.5 trillion.
While the yen's 18 percent decline against the dollar last year has led Toyota Motor Corp. and Mitsubishi Motors Corp. to forecast record profits, inflation driven by higher import costs is set to squeeze households. At the same time, Abe risks choking off consumption by raising the sales tax this year and next as he tries to fix the nation's finances.