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Japan Trade Deficit Hits Record as Yen Inflates Imports: Economy

Japan’s trade deficit swelled to a record 1.63 trillion yen ($17.4 billion) on energy imports and a weaker yen, highlighting one cost of Prime Minister Shinzo Abe’s policies that are driving down the currency.

Exports climbed 6.4 percent in January from a year earlier, the first rise in eight months, exceeding the median 5.6 percent estimate in a Bloomberg News survey of 24 economists. Imports increased 7.3 percent, the Finance Ministry said in Tokyo today.

Weakness in the yen that aids exporters such as Sharp Corp. and Sony Corp. also means the country pays more to import fossil fuels needed as nuclear reactors stand idle after the Fukushima crisis in 2011. That burden may encourage the government to limit the currency’s slide, with Deputy Economy Minister Yasutoshi Nishimura signaling in a Jan. 24 interview that the government may prefer a yen stronger than 110 per dollar.

“The trade deficit means the yen can’t just keep weakening,” said Takeshi Minami, chief economist at Norinchukin Research Institute Co. in Tokyo. “Abe will probably restart some nuclear plants after the upper house elections in July as, without them, the costs to the economy are too great.”

The yen fell after the data were released, before reversing course to trade 0.1 percent higher at 93.51 at 12:33 p.m. in Tokyo. The Nikkei 225 Stock Average was 0.8 percent higher.

Photographer: Kiyoshi Ota/Bloomberg

Containers are stacked at a shipping terminal in Tokyo. Exports climbed 6.4 percent in January from a year earlier, the first rise in eight months, exceeding the median 5.6 percent estimate in a Bloomberg News survey of 24 economists. Imports increased 7.3 percent, the finance ministry said in Tokyo today. Close

Containers are stacked at a shipping terminal in Tokyo. Exports climbed 6.4 percent in... Read More

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Photographer: Kiyoshi Ota/Bloomberg

Containers are stacked at a shipping terminal in Tokyo. Exports climbed 6.4 percent in January from a year earlier, the first rise in eight months, exceeding the median 5.6 percent estimate in a Bloomberg News survey of 24 economists. Imports increased 7.3 percent, the finance ministry said in Tokyo today.

Nearly 80 percent of Japan’s imports were denominated in foreign currencies in the second half of last year, compared with about 60 percent of exports, according to the Finance Ministry.

Export Increase

Exports to China rose 3 percent from a year earlier, the first increase since May, while those to the U.S. gained 10.9 percent, today’s data showed. Shipments to the European Union fell 4.5 percent.

“A rebound in global demand, especially the U.S., is helping Japanese exports,” Azusa Kato, an economist at BNP Paribas SA in Tokyo, said before the data.

The Finance Ministry said that the trade balance tends be weaker in January as the New Year holiday slows production and crimps exports.

Elsewhere in the region, Thailand will probably leave its benchmark interest rate at 2.75 percent later today, according to a Bloomberg News survey.

Malaysia’s economic growth probably quickened to 5.5 percent last quarter from a year earlier, another survey showed, from a 5.2 percent pace in the previous three months. Malaysia will also report inflation data today.

In Europe, France and Germany are scheduled to report inflation data today. In the U.S., new residential construction probably cooled in January, economists forecast ahead of a report due today.

China Trade

Japan’s government predicts that trade with China, the nation’s biggest export destination, will recover this year after falling in 2012 for the first time in three years because of a territorial dispute between the nations and a slowdown in the Chinese economy.

Japan’s car exports declined 8 percent from a year earlier, while iron and steel shipments increased 24.4 percent. Imports of liquefied natural gas rose 1 percent from a year earlier to the highest since at least May 1999. The average price paid by Japan for a metric ton of natural gas has risen almost 17 percent in yen terms since November, according to Bloomberg calculations based on Ministry of Finance data.

The yen has fallen more than 13 percent against the dollar in the past three months as Prime Minister Shinzo Abe calls for aggressive monetary easing to end deflation.

The currency weakened earlier today after the Yomiuri newspaper reported that Toshiro Muto, a former Bank of Japan deputy governor, may not be on the government’s list of candidates to succeed Masaaki Shirakawa as the head of the central bank. Muto warned of the dangers of prolonged loose policy when he was deputy five years ago even as he now says his views have changed.

To contact the reporters on this story: James Mayger in Tokyo at jmayger@bloomberg.net; 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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