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Japan’s trade deficit shrinks again

Tokyo - Japan's trade deficit narrowed again last month, data showed Wednesday, as a sales tax hike weighed on imports - denting demand for foreign fruit, lobsters and crude oil - while shipments of goods to overseas markets picked up pace.

The upbeat figures come hours before the Bank of Japan is to wrap up a two-day meeting and were likely to cement expectations that policymakers would hold fire on any new easing measures to fire up the world's number-three economy.

A file image of a merchant ship. Credit: REUTERS

The data also suggests the impact of a weak yen - which sent Japan's energy import bill soaring in the wake of the 2011.

Fukushima nuclear crisis - was starting to ease, and comes after Japan logged its strongest economic growth in more than two years during the first quarter.

But the April 1 consumption tax rise to 8.0 percent from 5.0 percent threatens to stall activity in the coming months, and has raised fears it would derail Prime Minister Shinzo Abe's growth blitz, dubbed Abenomics.

“While the narrowing in the trade shortfall in April may have been too strong to last, the deficit should remain low as domestic demand has weakened after the sales tax hike,” said London-based Capital Economics.

Highlighting the effect of Japan's April 1 sales tax rise was a nearly 36 percent drop in the import volume of shrimps, prawns and lobsters along with a fall in fruit shipments from overseas as restaurants and retailers saw demand slump.

The finance ministry data showed the trade deficit shrank 7.8 percent on-year in April, with Japan logging a shortfall of 808.9 billion yen ($8.0 billion) against the year-before deficit of 877.4 billion yen.

Exports climbed 5.1 percent to 6.07 trillion yen on robust shipments of automobiles and memory chips.

Imports rose 3.4 percent to 6.88 trillion yen, a much slower rate than high-paced rises seen over more than a year.

“Exports were solid and showed signs of future growth,” said Masahiko Hashimoto, economist at Daiwa Institute of Research.

“Imports fell on a range of goods.... The drop in crude oil imports was particularly big.”

Hashimoto added that Japan was likely to see a “shrinking trend” in its trade deficit.

Purchases of natural gas remained high as the resource-poor country scrambled to plug its energy gap after the 2011 Fukushima crisis forced the shutdown of nuclear reactors, which had supplied a third of the nation's power.

The yen's plunge since late 2012 contributed to boosting import bills.

But last month's crude oil imports fell 11.2 percent after spiking in the months before the sales tax hike took effect.

Japan's recent economic data has been volatile, with the tax rise skewing results, as questions linger about Abe's policy blitz.

The plan called for big government spending, central bank monetary easing and deregulation as the prescription for kickstarting Japan's long-lumbering economy.

While the moves ushered in a sharp drop in the yen - giving a lift to exporters' profitability - and a stock market rally last year, critics say Abe has yet to follow through on structural reforms to the economy, including shaking up labour markets, signing free-trade deals and bringing more women into the workforce. - Sapa-AFP

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