Japan’s Trade Deficit Widens as Export Growth Weakens: Economy

Photographer: Tomohiro Ohsumi/Bloomberg

Nissan Motor Co. vehicles bound for shipment sit in a lot at a port in Hitachi City, Ibaraki Prefecture, Japan. Close

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Photographer: Tomohiro Ohsumi/Bloomberg

Nissan Motor Co. vehicles bound for shipment sit in a lot at a port in Hitachi City, Ibaraki Prefecture, Japan.

Japan’s weakest export growth in a year spurred a wider-than-forecast trade deficit in March, adding to challenges for Prime Minister Shinzo Abe in steering the economy through the aftermath of an April 1 sales-tax rise.

The 1.8 percent rise in the value of shipments overseas from a year earlier, reported today by the Ministry of Finance, compared with a 6.5 percent median estimate of 27 economists in a Bloomberg News survey. An 18.1 percent jump in imports helped widen the deficit to the biggest ever for the month.

Exports by volume fell the most since June last year, suggesting external demand may fail to provide much support for an economy set to contract this quarter. A spending spree ahead of the tax increase boosted imports, already swollen by a surge in energy costs due to the yen’s slide and nuclear shutdowns.

“In spite of the continued weaker yen, the performance of Japanese exporters is quite weak compared to competitors like Korea or Taiwan,” said Junko Nishioka, chief Japan economist at Royal Bank of Scotland Group Plc in Tokyo. The trade balance will deteriorate “unless the government decides to restart nuclear power plants,” she said.

The rush demand ahead of the tax increase could have prompted companies to divert shipments to the domestic market, rather than overseas, crimping export growth, said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo.

Reflationary Drive

Abe’s drive to shake off more than a decade of deflation and economic drift helped drive down the yen, boosting profits of exporters such as Toyota Motor Corp. even as shipment volumes remain sluggish. Export volumes fell 2.5 percent in March from a year earlier.

At the same time, the Japanese currency’s 19 percent drop since Abe came to power in December 2012 has boosted import values, contributing to 21 straight monthly deficits -- the longest slide in comparable data back to 1979.

The yen was down 0.2 percent at 102.63 as of 11:48 a.m. in Tokyo today.

The Bank of Japan is forecast to add to already unprecedented easing to cushion the economy from the sales-tax increase and keep inflation on track to its 2 percent target.

A survey of economists conducted ahead of the BOJ’s April 8 meeting showed 72 percent forecasting the central bank would add stimulus before or during July.

Weakness in exports could be a potential trigger for more easing in July, according to JP Morgan Chase & Co. economist Masaaki Kanno.

Ballooning Deficit

The deficit quadrupled from a year earlier to 1.45 trillion yen ($14.1 billion), larger than a 1.08 trillion yen projection by economists. On a seasonally adjusted basis, the deficit grew to 1.71 trillion yen.

“Japan’s trade deficits may continue for at least three years,” said Muto, citing high energy costs and reduced potential for exports.

Other data today showed sluggishness in the nation’s corporate sector. Demand for loans from Japanese companies decreased in April from three months earlier, a BOJ survey showed.

Japan’s ruling Liberal Democratic Party is considering loosening restrictions on lenders to make it easier for small businesses to procure funds, the Nikkei newspaper reported on April 19.

While department store sales in March soared the most since at least 1991, Abe now has to ensure domestic demand doesn’t tail off with shoppers having to pay more for goods because of the higher sales levy.

Consumer confidence fell in March for a fourth straight month to 37.5, down from 45.7 in May last year -- the highest point during Abe’s current term as prime minister.

The government this month cut its assessment of the economy for the first time since November 2012.

To contact the reporters on this story: Masaaki Iwamoto in Tokyo at miwamoto4@bloomberg.net; Chris Shimamoto in Tokyo at cshimamoto@bloomberg.net

To contact the editors responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net Andy Sharp, Arran Scott

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