Japan Unexpectedly Posts a Trade Surplus as Oil Prices Drop

Japan posted an unexpected trade surplus in June as lower oil prices contributed to the first drop in imports since December 2009.

Imports fell 2.2 percent from a year earlier, resulting in a trade surplus of 61.7 billion yen ($789 million), the Finance Ministry said in Tokyo today. Exports dropped 2.3 percent. The median forecast in a Bloomberg News survey of 29 analysts was for a shortfall of 140 billion yen.

Japan’s petroleum imports more than doubled in the fiscal year ended March as the nation closed down nuclear reactors in the aftermath of last year’s Fukushima disaster. While falling oil prices are a boon, weaker global demand and a stronger yen may squeeze exports and cap growth in the world’s third-largest economy.

“It’s still not clear whether Japan can sustain a trade surplus,” said Yoshiki Shinke, chief economist at the Dai-Ichi Life Research Institute in Tokyo. “There’s no clear sign of a recovery in exports as the European economy remains weak and China’s growth is slowing.”

Crude oil prices on the New York Mercantile Exchange fell to $77.69 dollars per barrel on June 28, down 29 percent from their year-to-date high of $109.77 on Feb. 24. The nuclear accident and subsequent shutdowns of other plants around the country caused energy imports to surge last year.

The yen advanced against the dollar after the report, trading at 78.10 as of 9:52 a.m. in Tokyo. The Nikkei 225 Stock Average slid 1.5 percent. International investor concern has fueled the yen’s appeal as a haven asset, causing it to advance to an 11-year high against the euro. The yen has risen more than 6 percent against the dollar since mid-March.

Record Deficit

The nation posted a record trade deficit of 2.9 trillion yen in the six months ended June, according to today’s report.

Japan’s government said this week that signs of a global slowdown have increased as it became more pessimistic about the prospects for China, Japan’s largest trading partner. The International Monetary Fund lowered its 2013 global growth forecasts this month on Europe’s debt crisis and slower expansions in emerging markets from China to India.

Finance Minister Jun Azumi said yesterday the yen movements had been “one-sided” and reiterated that authorities were prepared to act “decisively” to counter excessive movements in the currency.

Toshiba Corp. (6502), the world’s biggest maker of flash memory after Samsung Electronics Co., said it will cut production of NAND flash memory by 30 percent as weakened demand for data storage devices led to a glut. Its shares tumbled to their lowest in more than three years in Tokyo trading yesterday.

Lending Program

The government is considering extending a 10-trillion yen lending program beyond its expiration on Sept. 30 to help companies take advantage of a stronger currency by pursuing mergers and acquisitions abroad, according to two government officials. The officials, who spoke on condition of anonymity because the discussions haven’t been made public, didn’t elaborate on how long the program may be extended.

The facility has helped finance 15 projects worth $8.9 billion, according to the state-run Japan Bank for International Cooperation. JBIC Governor Hiroshi Okuda, who’s also a former chairman of Toyota Motor Corp. (7203), this month said Japanese businesses are calling for an extension of the program.

To contact the reporter on this story: Andy Sharp in Tokyo at asharp5@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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