Japan’s trade deficit doubles as energy imports increase

TOKYO - Agence France-Presse

This file photo shows shipping containers being loaded onto an international freighter at the international cargo terminal in Tokyo. Japan’s July trade deficit doubled despite its strong export picture. AFP photo

Japan’s trade deficit nearly doubled last month as a weaker yen sent the country’s energy import bill soaring, despite a brightening export picture, official data showed yesterday.The finance ministry reported a bigger-than-expected deficit of 1.024 trillion yen ($10.5 billion) for July, from 528.55 billion yen ($5.4 billion) in 2012. That was the 13th straight month of shortfalls in what is the longest deficit spell in more than three decades.The gap came even as the value of exports jumped 12.2 percent in July from a year earlier, powered by strong demand in the United States and China, as well as Europe. “The deficit was much bigger than expected because the weak yen sent costs of energy imports up and contributed to the larger deficit,” said Hideki Matsumura, analyst with Japan Research Institute.“But the data showed that exports are on course to recovery thanks to the weaker yen and strong demand in the US market.“The deficit will likely shrink going forward as exports are expected to outpace imports due to the impact of the yen.” A weaker yen boosts the value of exports denominated in foreign currencies when they’re converted back to the Japanese currency, which impacts the profitability of exporters such as Toyota and Sony.The value of shipments to the key US market jumped 18.4 percent from a year earlier, while the data showed an upturn in exports to the troubled eurozone with a 16.6 percent on-year increase.Exports to China rose 9.5 percent, after a territorial dispute between Tokyo and Beijing that flared anew last year, hurting the Asian giants’ trade ties.The yen has declined by about 20 percent against the dollar since late last year, boosting exporters’ competitiveness overseas and inflating the value of their foreign-earned income. However, Japan’s energy import bills have surged since Tokyo shut down the country’s nuclear reactor following the crisis at Fukushima in March 2011, as it turned to price fossil fuel alternatives.Unusually hot summer temperatures likely contributed to pushing up demand for electricity, observers said. Monday’s data comes a week after separate figures showed the world’s third-largest economy slowed in the last quarter, raising questions about whether Tokyo would go ahead with sales tax hikes that some fear could derail its bid to stoke growth. The GDP figures painted a mixed picture of firming consumer consumption but little evidence that companies are confident enough to start spending big on new investment and hiring more workers.The state of Japan’s economy is a key issue for the administration of Japanese Prime Minister Shinzo Abe, which is mulling a series of sales tax hikes which could double the rate to 10 percent by 2015.They are seen as crucial for raising fresh revenue to chop Japan’s eye-watering national debt -- proportionately the worst among industrialized nations -- but there are fears it could stall Tokyo’s stimulus plan, dubbed “Abenomics”. Last week, the Cabinet office said the economy expanded by weaker-than-expected 0.6 percent from the previous quarter.The pace of expansion also slowed on an annualized basis with a 2.6 percent increase, from a revised 3.8 percent jump in the first quarter. Annualized data show how the economy would grow if the quarterly performance was stretched across the full year.