TOKYO (Reuters) — Japan suffered a
record trade deficit in January as a weak yen pushed up the cost of
imports and failed to substantially raise exports, suggesting that
the trade-reliant economy faces a bumpy ride even as policymakers
put on a brave face about the outlook.
The data followed on the heels of a survey showing manufacturers'
sentiment worsened in January, underscoring the stiff challenges for
Prime Minister Shinzo Abe's strategy to spark sustainable growth
over the long run.
Ministry of Finance (MOF) data released on Thursday showed exports
rose 9.5 percent in January but the effect of the softer yen on
shipments was outweighed by a substantial rise in import costs. It
also marked the third straight month of slower export growth.
The trade balance stood at a deficit of 2.79 trillion yen ($27.30
billion) in January, the 19th straight month in the red, versus a
2.5 trillion yen shortfall expected by economists.
The ballooning deficit is a reminder that a weak yen alone cannot
boost exports as Japanese firms are shifting production abroad,
while overseas demand lacks strength needed to offset a blow from a
sales tax hike in April.
A stumble in the economy could force policymakers to resort to
further stimulus to prop up growth, although at this week's meeting
the Bank of Japan ruled out the immediate need for more monetary
steps.
"If the economy weakens further after a sales tax hike, policymakers
could resort to fiscal stimulus as early as summer. The Bank of
Japan could ease policy further later this year if it becomes clear
that its 2 percent inflation target cannot be met," said Yasuo
Yamamoto, senior economist at Mizuho Research Institute.
Adding to the recent run of soft data, a Reuters poll showed
sentiment at Japanese manufacturers slipped in February for the
first time in five months and is seen sliding further, a worrying
sign the economy may be ill-equipped to cope with the tax hike
without further stimulus.
Abe's reflationary policies have weakened the yen by about 20
percent in the year to January, supporting the value of export
receipts in yen terms and helping exporters' earnings. But they have
so far failed to shore up volumes.
The MOF data showed export volumes fell 0.2 percent in January from
a year before.
The rise in exports undershot economists' estimate of a 12.6 percent
gain, slowing from a 15.3 percent gain in the previous month. It
marked an 11th straight month of export growth thanks to a weak yen
and brisk car shipments.
Imports rose 25.0 percent year-on-year in January, against an
expected rise of 21.8 percent, due in part to the weak yen and
strong demand for fossil fuels to make up for nuclear power lost
since the 2011 Fukushima crisis.
The last-minute demand before a sales tax hike in April may have
helped boost imports while exports tend to slow in January due in
part to New Year holidays, ministry officials said.
Analysts say the monthly trade deficits may narrow in coming months
as a global recovery boosts export demand and a surge in consumer
spending eases after the tax increase kicks in.
There are worries in some quarters that the trade shortfalls could
pull the current account into the red in coming years, meaning that
Japan may start chipping away at its vast pool of domestic savings
and increasing the need to rein in its huge public debt.
($1 = 102.2150 Japanese yen)
(Additional reporting by Izumi Nakagawa;
editing by Chang-Ran Kim & Shri Navaratnam)
The data followed on the heels of a survey showing manufacturers'
sentiment worsened in January, underscoring the stiff challenges for
Prime Minister Shinzo Abe's strategy to spark sustainable growth
over the long run.
