May 23 (Bloomberg) -- Japan’s exports rose a less-than-estimated 7.9 percent in April from a year earlier, underscoring the risk that weakness in global demand may limit the rebound in the world’s third-biggest economy.
Imports gained 8 percent, leaving a trade deficit of 520.3 billion yen ($6.5 billion), the finance ministry said in Tokyo today. The median forecast in a Bloomberg News survey of 27 analysts was for exports to increase 11.8 percent after rising 5.9 percent in March.
Earthquake reconstruction work and gains in consumer spending helped to drive an annualized 4.1 percent expansion in the first quarter after a 0.1 percent gain in the final three months of 2011. Japan’s debt-rating downgrade by Fitch Ratings yesterday signaled the importance of the economy maintaining momentum to limit a deterioration in the nation’s finances.
“The overall picture for exports looks dull,” said Kiichi Murashima, chief economist at Citigroup Global Markets Japan Inc. in Tokyo. “If exports stay flat when the effect of post-quake reconstruction is likely to peak out in the latter half of the year, there’s a possibility Japan’s economy will fall into a lull.”
Japan posted a 84.5 billion yen deficit in March. The yen traded at 79.97 per dollar as of 9:55 a.m. in Tokyo after weakening yesterday when Fitch said that Japan’s “fiscal consolidation plan looks leisurely relative even to other fiscally-challenged high-income countries, and implementation is subject to political risk.”
Bank of Japan policy makers are meeting today to decide on whether more stimulus is needed to support growth and counter deflation. Seven of 14 economists surveyed by Bloomberg News said they expect the central bank to bolster monetary stimulus by July, while none predicted immediate action.
Europe’s debt crisis and speculation that Greece will exit the euro are clouding the outlook for Japanese exporters such as Sony Corp. and Hitachi Construction Machinery Co.
In the latest trade figures, comparisons are distorted by disruptions a year earlier in the aftermath of the March 11 quake and tsunami that devastated north-eastern regions. Energy imports have increased because of nuclear plant shutdowns that followed the disaster.
Fitch cut Japan’s local-currency rating one step, and foreign-currency grade two levels, to A+, the fifth-highest ranking. The move escalated pressure on lawmakers to double the sales tax to boost revenue, with the Organization for Economic Cooperation and Development warning the nation’s debt is heading into “uncharted territory.”
A surge in demand for Japanese government bonds that sent 10-year yields to the lowest level since 2003 this month is masking the risks from rising debt. Prime Minister Yoshihiko Noda has failed to persuade opposition lawmakers to support his legislation, leaving gross public debt poised to reach 223 percent of gross domestic product next year, the OECD said.
“The trade deficit still has room to expand further,” Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo and a former central bank official, said before the report, citing demand for energy imports.
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