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Japan Trade Deficit Widens as Fossil Fuel Imports Surge: Economy

Oil Refinery
A flare burns off excess gas from a stack nearby Cosmo Oil Co.'s refinery in Ichihara City, Chiba Prefecture, Japan. Fossil fuels contributed to nearly half of the gain in imports, with the value of petroleum shipments to Japan soaring 67.8 percent from the previous year, and liquefied natural gas rising 39.4 percent. Photographer: Yuriko Nakao/Bloomberg

Japan posted its biggest October trade deficit on record, as a revival in exports to the U.S. and China was overwhelmed by the nation’s soaring costs for imported fuel in the wake of the nuclear industry’s shutdown.

The shortfall of 1.09 trillion yen ($10.9 billion) extended a record run of deficits to 16 months, and was larger than all 28 forecasts in a Bloomberg News survey, a finance ministry report showed today in Tokyo. Imports climbed 26.1 percent from a year earlier, while exports gained 18.6 percent.

The yen’s slide has helped boost profit forecasts and pushed up stock prices of exporters such as Toyota Motor Corp, while at the same time raising the cost of imports. The deficits are likely to continue and may drag on growth in the world’s third-largest economy, according to economist Norio Miyagawa.

“Exports are rebounding on a pick-up in the overseas economy, while imports are likely to expand further before a sales-tax increase” in April, said Miyagawa, a senior economist at Mizuho Securities Research and Consulting Co. in Tokyo. “The deficits aren’t a good sign for Japan’s economy as they mean wealth is flowing out of Japan.”

The yen was 0.2 percent stronger at 99.96 per dollar at 11:17 a.m. in Tokyo, while the Topix stock index was down 0.3 percent.

Fuel Imports

Fossil fuels contributed to nearly half of the gain in imports, with the value of petroleum shipments to Japan soaring 67.8 percent from the previous year, and liquefied natural gas rising 39.4 percent. The large gain in October this year may partly reflect depressed imports a year earlier following a tax change for some fossil-fuel imports.

Exports to China increased 21.3 percent from a year ago when the two nations were embroiled in a row over islands in the East China Sea. Shipments to the U.S. rose 26.4 percent, while those to the European Union climbed 27 percent.

The record stretch of 16 monthly deficits is the longest in comparable data back to 1979.

Gross domestic product grew at an annualized 1.9 percent in the three months through September after a 3.8 percent expansion the previous quarter. The economy will contract in the second quarter of next year following the April increase in the consumption levy.

Bernanke Comments

The U.S., Japan’s largest export destination, is displaying signs of picking up.

The labor market in the U.S. has shown “meaningful improvement” since the start of the Federal Reserve’s bond-buying program and the benchmark interest rate will probably stay low long after the purchases end, Fed Chairman Ben S. Bernanke said yesterday in a speech in Washington.

Data today are forecast to show U.S. retail sales rose in October after a decline in the previous month, while U.S. consumer prices remained unchanged from a month earlier after a gain in prior period, according to surveys of economists by Bloomberg News.

Elsewhere, Australia’s central bank would prefer the local dollar to be lower, Assistant Governor Guy Debelle said today at a forum in Sydney.

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