Tuesday, 24 May, 2022

Japan’s trade deficit soars to 8-year high

Japan’s trade deficit soars to 8-year high

TOKYO: Japan ran its biggest trade deficit in a single month in eight years in January as high energy costs swelled imports and manufacturers struggled with global supply constraints, causing a decline in car shipments.

The growing trade deficit highlights the world’s third-largest economy’s vulnerability to soaring commodity costs, on which manufacturers rely for production at home, report agencies.

Imports soared 39.6 per cent year-on-year in January to hit a record high in terms of their value in yen, coming to 8.5231 trillion yen ($73.81 billion), Ministry of Finance data showed on Thursday, above a median market forecast for a 37.1 per cent increase.

That greatly outstripped a 9.6 per cent rise in exports in the year to January, bringing the trade balance to a deficit of 2.1911 trillion yen, its biggest in a single month since January 2014.

That was much bigger than the median estimate for a 1.607 trillion yen shortfall.

“Exports tend to go down in January due to seasonal factors as factory operation rates are usually low due to New Year holidays,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.

“So it’s easy for the trade balance to go in the red in the month, but the deficit was still large, even when taking that into account.”

A big factor in the deficit was a decline in car exports, said Tsunoda, which swung into contraction from an expansion in the previous month.

Manufacturers including Toyota Motor Corp and Suzuki Motor Corp have been forced to temporarily close some plants after facing supply chain disruptions and pressure from a record surge in COVID-19 infections at home.

Imports were pushed up by surging incoming shipments of petroleum, coal and liquefied natural gas.

By region, exports to China, Japan’s largest trading partner, shrank 5.4 per cent in the 12 months to January, posting its first contraction in 19 months, while imports jumped 23.7 per cent to post their largest rise in four months.

That was likely in part due to slower exports and a front-loading of demand ahead of China’s week-long Lunar New Year holiday that started on the last day of January. U.S.-bound shipments, another key market for Japanese goods, grew 11.5 per cent in January, as stronger machinery shipments outweighed a fall in car exports.