Slight
Rise in Exports Overpowered by 18.1% Import Jump
TOKYO—Japan's
trade deficit increased sharply in March, suggesting that an early turnaround
in the trade balance may be further away than had been hoped for.
While
some of the increase was due to a temporary factor—higher spending ahead of the
April 1 sales tax increase—exports were
also weaker, especially to Asia, presenting a new challenge to Prime Minister
Shinzo Abe's efforts to revive the economy.
Finance
Ministry data showed Monday that exports grew only 1.8% from the year before,
despite a 9% fall in the yen against the dollar. A weaker yen lifts the nominal
value of exports when expressed in yen terms. Exports fell 12.5% to Thailand,
7.2% to Indonesia and 6.2% to South Korea.
Stripping
out the effects of the weaker yen, exports fell 2.5% in volume terms, the
biggest drop in nine months. Export volumes fell to all regions except the U.S.
With
imports being pushed up by spending ahead of the April 1 sales tax rise, the
trade gap ballooned to ¥1.45 trillion ($14 billion) in March. The figure was
the largest ever for the month and marked a record 21 straight months of
shortfalls.
The
massive deficit, which compares with a gap of ¥356.9 billion a year ago, was much
worse than the median forecast of a ¥1.07 trillion deficit in a survey of
economists by The Wall Street Journal and the Nikkei.
Imports
jumped 18.1% from the previous year, outpacing the 1.8% rise in exports. The
economic slowdown in China and Thailand has depressed demand for Japanese
machinery and auto parts. The continued move to offshore production in
countries like Mexico also apparently dented overseas demand for
Japanese-produced autos and electronics.
The
weaker exports are in line with downbeat views from the International
Monetary Fund, which earlier in April trimmed its global growth
estimate to 3.6% from 3.7% for 2014, citing a more modest pickup in growth in
emerging economies.
Japan's
trade balance has been deteriorating steadily over the past three years, in
part due to a surge in fossil-fuel imports following the March 2011 nuclear
accident in northern Japan. The deficits started to swell under the Abe
administration, as his policy of weakening the yen lifted the import bill
without similarly raising exports.
The
import growth suggests domestic demand will stay strong, even after the sales tax goes up, as most
of the items imported in March were to stock shop shelves for April or later,
government officials said.
Other
economic data point to an early rebound in consumption. Year-over-year declines
in appliance sales narrowed to 2% in the second week of April, from 19% in the
first week. Those in sales of food and beverages narrowed to 10% from 17%,
according to the Cabinet Office.
If
imports remain strong, it is even more critical that exports recover for Japan
to fix its trade balance. But with China's economy slowing, Thailand in
political turmoil, and the rest of Southeast Asia still grappling with tighter
credit following the U.S. move to reduce its monetary stimulus, a quick
recovery in exports looks difficult.
"Japan
will make every effort to increase trade with emerging economies, including
through the Trans-Pacific Partnership," said Yoshihisa Furukawa, senior
vice finance minister, on Monday, referring to U.S.-led free trade talks now being
negotiated. The U.S. and Japan, the two biggest participants in the
initiative, have been negotiating intensively in the past month to reach a
broad agreement on the pact.
Some
economists now warn of prolonged trade deficits.
"It
remains difficult for exports to recover even if overseas economies improve.
There is a risk of increasing imports and ballooning trade deficits," said
Junko Nishioka, chief economist at RBS Securities Japan.
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