Japan posts first trade deficit in 5 months

Higher energy prices overpower slower growth in exports due to Chinese New Year

TOKYO • Japan logged its first trade deficit in five months last month, official data showed yesterday, as higher energy prices overwhelmed slower growth in exports due to the Chinese New Year.

The country routinely falls into deficit in January due to the Chinese New Year celebrations in key trade partners such as China, which sees an extended holiday.

But Mr Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance, said the export weakness would not last. "Exports are still on the recovery track," he told Bloomberg News. "The global economy is steadily recovering. There's no change to the view that Japan's economy is driven by external demand while domestic demand is remaining weak."

Prime Minister Shinzo Abe has been trying to kick-start growth for more than four years with a policy of spending, central bank policy easing and structural reform, but the outcome has been mostly disappointing. Inflation and consumer spending are weak, and companies have been reluctant to boost wages in the world's third-largest economy.

Higher commodity prices stemming from the Organisation of Petroleum Exporting Countries' decision to cut production last year will affect Japan's terms of trade as the nation imports all its energy supplies.

For last month, the trade deficit came to 1.1 trillion yen (S$13.8 billion), expanding 67.8 per cent from the same month a year ago.

The deficit was the first since August last year and marked a sharp reversal from a surplus of 640 billion yen in December.

Japan's China-bound exports rose 3.1 per cent last month, sharply lower than the 12.4 per cent jump seen in December. Imports from China, meanwhile, rose 7.2 per cent, resulting in Japan recording its 59th straight monthly deficit against Asia's largest economy.

Overall exports rose 1.3 per cent, falling short of the market expectation for a 5 per cent rise.

Imports increased 8.5 per cent, the first rise in more than two years, and came in higher than the market expectation of a 4.8 per cent rise.

Japan's exports to the United States fell 6.6 per cent, led by weaker automobile and semiconductor shipments, while imports rose 11.9 per cent, driven largely by gas and grains.

The trade balance and currency have become issues in relations with the US under the Trump administration.

Japan is looking to arrange bilateral talks on trade and the economy in April, with US Vice-President Mike Pence and Japanese Finance Minister Taro Aso to lead the talks.

AGENCE FRANCE-PRESSE, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on February 21, 2017, with the headline 'Japan posts first trade deficit in 5 months'. Print Edition | Subscribe