Japan trade deficit rises to new record

Japan’s trade deficit widened to a record in January, as falling exports combined with surging imports of energy.

Imports rose 9.8 per cent from a year earlier, while exports were down by 9.3 per cent, resulting in a record monthly deficit of Y1.48tn ($19bn), according to Monday’s data from the finance ministry.

Last year Japan’s trade balance fell into an annual deficit for the first time since 1980, driven by subdued global demand and soaring fossil fuel imports since the Fukushima nuclear crisis.

Analysts noted that Japan’s trade performance is historically weak in January, which has fewer business days. Adjusted for seasonality, the monthly deficit still hit a record Y613bn but was only marginally wider than the deficits in November (Y542bn) or December (Y569bn).

“It is a deterioration, but a headline of a ‘record-high’ deficit may be slightly misleading,” said Kiichi Murashima, chief economist at Citi in Tokyo.

The timing of the new year holiday in China, which this year fell in January rather than February, also affected the year-on-year comparison. Japan’s exports to China fell by a fifth, while imports increased by 8 per cent, almost doubling the trade deficit with China to Y588bn. Greater China is easily Japan’s biggest export market, accounting for 21 per cent of total shipments in January.

Import data, meanwhile, underlined Japan’s rising dependence on imports of coal and liquefied natural gas, to substitute for nuclear plants idled after the Fukushima crisis. Mineral fuel imports increased by 24 per cent, year-on-year, accounting for three-quarters of the overall rise in the value of imports.

Japan’s persistent monthly trade deficits since the March earthquake have awakened concerns over the erosion of its current account surplus, and by extension, the ability of the country to support the world’s biggest gross debt burden. Japan’s budget deficit was equivalent to 9 per cent of gross domestic product last year, among the world’s largest by that measure.

Analysts say they are looking for evidence of a recovery from last year’s twin disasters in Japan and the floods in Thailand, which hit production of cars and electronics.

“As long as China and Europe maintain some growth, Japan’s overall current account surplus may not be in any real danger,” said Masamichi Adachi, economist at JP Morgan in Tokyo.

A weakening yen may help, in that context. The yen has lost 2.5 per cent against the dollar since the Bank of Japan eased monetary policy last week, and adopted a firmer target for inflation.

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