Japan logs record trade deficit

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JapanDeficit111 Reuters. A Japanese flag flutters in front of a shipping container area, at a port in Tokyo.

Tokyo - Japan's trade deficit swelled in January to another monthly record, data showed Thursday, as once-bumper surpluses disappear under the weight of soaring post-Fukushima energy bills, an imbalance driven by premier Shinzo Abe's cheap-yen policies.

The 2.79 trillion yen ($27.3 billion) shortfall also underscored a boost in purchases of foreign goods ahead of an April sales tax rise, analysts said, as fears grow that the hike will derail a recovery in the world's third-largest economy.

Japan's yawning deficit marked the latest worrying news after its sizzling GDP growth in the first half of last year slowed to a crawl in the fourth-quarter, and as it posted a record trade deficit through 2013.

The yen has lost about a fifth of its value against the dollar since late 2012, owing to a policy blitz dubbed Abenomics, which meshes government spending with massive central bank monetary easing - a plan aimed at reviving the long-lumbering economy.

While the weaker currency boosts Japanese exporters' profitability, it also makes goods purchased from overseas more expensive.

The growing imbalance was stoked by a 25 percent jump in January imports to a record 8.04 trillion yen on pricey bills for oil and gas purchases, after Japan shuttered its nuclear reactors in the wake of the worst atomic crisis in a generation at Fukushima in 2011.

But the monthly volume of energy imports has been slowing, with January's rise also driven by stronger spending ahead of the tax rise, which is seen as crucial to bringing down Japan's eye-watering national debt, said London-based Capital Economics.

“The most recent increase in imports can largely be attributed to strong domestic demand ahead of the upcoming sales tax hike, and a narrowing in the shortfall seems likely after April,” it added.

Despite upbeat exports to key markets in the US, China and Europe, Japan's January deficit ballooned by 70.8 percent from a year earlier and was equal to about one-quarter the country's trade deficit through all of 2013.

Exports rose 9.5 percent to 5.25 trillion yen, partly driven by a jump in shipments of vehicles, but the value of shipments overseas lagged the sharp drop in the yen, Nomura Securities said.

“Japanese companies have probably not benefited fully from the depreciation,” it said in a report.

“We think one reason for this is probably the high proportion of Japanese exports to the rest of Asia denominated in yen. Another possible factor is that Japanese exports may be less competitive than in the mid-2000s, when export prices rose to the same extent as the dollar-yen (rate),” it added

A weak yen inflates repatriated overseas profits and gives Japanese firms more flexibility on the price of products they sell abroad. The biggest beneficiaries tend to be auto giants such as Toyota, as well as electronics and steel producers.

“While there is no doubt that the weakening of the yen that has followed the launch of Abenomics has had a positive impact on Japanese exporters, the degree of that impact varies considerably from sector to sector,” Nomura said.

In recent years, Japanese firms have also continued to move production overseas away from high-cost Japan and when the yen was trading at record highs.

Despite his sweeping national elections on a pledge to kickstart the long-lumbering economy, the impact of Abe's policies has largely stopped at the boardroom door.

A recent poll by Kyodo News showed nearly three-quarters of Japanese people felt no effect from the economic growth drive, while Abe's calls for firms to hike wages so consumers spend more have gone largely unheeded so far.

Critics say the premier has yet to follow through on structural reforms to the economy, including shaking up labour markets, inking up free-trade deals and bringing more women into the workforce.

Japan's January exports to Europe rose 20.2 percent from a year earlier, while they were up 21.9 percent to the US and 13.1 percent to China. - Sapa-AFP



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