Japan’s Record Run of Annual Trade Deficits Is Set to Continue

Even with the March surplus reported Wednesday, Japan’s record run of annual trade deficits is poised to continue this year, a survey by Bloomberg shows.

Imports will exceed exports in 2015, according to 8 of 10 economists polled after the monthly data. The median estimate was for a 3.2 trillion yen ($26.8 billion) shortfall in 2015.

The shuttering of all Japan’s nuclear power plants after the Fukushima disaster forced the nation to import more fossil fuels, causing 4 years of deficits, which hit a record 12.8 trillion yen last year. While exports are benefiting from the weaker yen, they have yet to recover to their 2008 peak, and the currency’s drop makes imports more expensive.

“The pace of global economic recovery is moderate so it’s unlikely that the trade balance will turn positive this year,” said Takeshi Minami, an economist at Norinchukin Research Institute. “Cheaper energy prices will help reduce Japan’s trade deficit by about 6 trillion yen this year.”

The first surplus in 33 months in March was helped by a rebound from reduced activity in Asia in February due to Lunar New Year holidays in countries including China.

The 46 percent drop in the price of Brent crude oil prices since June 2014 has reduced some of the pain from increased imports. Oil and liquid natural gas comprised about 25 percent of imports in 2014, and the drop in prices has reduced the cost of everything from food to electrical utilities.

Falling Oil

The value of shipments to overseas hit the highest since September 2008 in March, and volume rose to the most since March 2012. Citigroup Inc.’s Kiichi Murashima and four of the other economists surveyed by Bloomberg said they are cautious about how far this trend will go.

“Export growth will remain moderate in 2015 as demand for high-tech products is slowing down globally,” said Murashima. “The trade balance is improving but a stronger export recovery will be necessary for an annual trade surplus.”

A domestic recovery will cause imports to rise and this will be a factor preventing the trade balance from swinging into positive territory, according to four of the economists surveyed.

Wage increases will support domestic consumption and imports, according to Taro Saito, director of economic research at NLI Research Institute in Tokyo. Large Japanese companies agreed to increase monthly wages by an average 2.59% from April, the most since 1998, according to a survey by Japan’s biggest business lobby, Keidanren.

Still, Nomura Holdings Inc. and JPMorgan Chase & Co. forecast a trade surplus this year as they see a stronger export recovery.

The balance will turn positive in the current quarter through June, driven by demand in the U.S. and as the effects of cheaper oil prices start to show up more clearly, according to Yoshitaka Suda, an economist at Nomura Holdings Inc.

Before it's here, it's on the Bloomberg Terminal.