Japan runs biggest trade deficit in more than 8 years in May -Breaking
By Daniel Leussink
TOKYO (Reuters – Japan ran its largest single month trade deficit in eight years in May. High commodity prices, declines in yen and high commodities drove up imports which clouded the country’s outlook.
The world’s third-largest country is facing a trade deficit that will increase due to a fall in the yen as well as rising fuel and material costs. Domestic manufacturers depend on this for their production.
The Ministry of Finance data revealed that imports rose 48.9% over the past year, surpassing a median forecast by Reuters for a gain of 43.6%.
This was more than the 15.8% increase in exports year-on-year in the same month. It resulted in a trade deficit of 2.385 trillion Japanese yen ($17.80 Billion), the biggest shortfall since January 2014.
“The weak yen is a major factor behind the rise in imports,” said Harumi Taguchi, principal economist at S&P Global (NYSE:) Market Intelligence.
She said that there will be some delay before exports benefit from it.
May’s deficit of 2.23 trillion yen was the largest ever recorded in a single month. This was 10th consecutive month with year-on-year losses.
Due to lower shipments of equipment and machinery to China in 2012, Japan’s biggest trading partner fell 0.2%.
The United States is the largest economy in the world. Shipments to the USA rose by 13.6% in May thanks to higher exports of machinery, mineral fuels and motor vehicles, but fell by 11.6%.
Atsushi Takeda (chief economist, Itochu Economic Research Institute) stated that it is difficult to anticipate a significant increase in exports, even though the weakening yen has brought some benefits. Therefore, exports will not bring down the trade deficit.
According to data, overall imports were driven up by higher shipments of oil and coal from Australia.
Japan’s economy will grow by 4.1% annually this quarter, as the coronavirus pandemic recedes. However, the slide in the Japanese yen threatens to harm consumer sentiment. Higher fuel costs and higher food prices are causing pain for households.
A private survey revealed that nearly half of Japanese businesses see the weakening yen negatively for their business. This suggests that currency declines are affecting business sentiment.
($1 = 133.9800 yen)