Ja­pan posts sharp drop in May trade deficit

The China Post - - INTERNATIONAL -

Ja­pan posted a US$1.75 bil­lion trade deficit in May, a dra­matic fall from a year ear­lier due to a drop in energy im­ports, but still not enough to off­set lack­lus­ter ship­ments over­seas, of­fi­cial data showed Wed­nes­day.

The gap be­tween im­ports and ex­ports came in at 216.0 bil­lion yen (US$1.75 bil­lion), down about 76 per­cent from a 917.2 bil­lion yen deficit a year ear­lier.

The value of the coun­try’s im­ports de­clined 8.7 per­cent in May as fall­ing oil and gas prices re­duced Ja­pan’s energy bills, while ex­ports rose a weaker-thanex­pected 2.4 per­cent.

But there was still con­cern about the health of the Ja­panese econ­omy, par­tic­u­larly that weak de­mand over­seas could dent fac­tory out­put as man­u­fac­tur­ers try to cut an in­ven­tory buildup that boosted growth in the first quar­ter.

A 1.0 per­cent ex­pan­sion in the world’s num­ber three econ­omy be­tween Jan­uary and March — or 3.9 per­cent on an an­nu­al­ized ba­sis — was sharply up from an ini­tial es­ti­mate of 0.6 per­cent growth.

The up­beat data was good news for Tokyo’s ef­forts to boost the econ­omy, but house­hold spend­ing re­mains stub­bornly weak as the Bank of Ja­pan strug­gles to push up prices in a bid to end decades of de­fla­tion.

The BOJ has been forced to push back a timeline for hit­ting a 2.0 per­cent in­fla­tion tar­get — a corner­stone of Prime Min­is­ter Shinzo Abe’s plan to kick-start the long-strug­gling econ­omy.

De­spite wage rises at big firms and a tighter la­bor mar­ket, con­vinc­ing peo­ple to splash out on con­sumer goods has been a strug­gle af­ter Ja­pan raised sales taxes last year to help pay down a huge na­tional debt.

The rise ham­mered con­sumer spend­ing and pushed the econ­omy into a brief re­ces­sion. Ja­pan limped out of the red in the last three months of 2014.

An­a­lysts have warned

that growth could slow sharply in the sec­ond quar­ter as Wed­nes­day’s trade fig­ures raised a red flag about de­mand over­seas.

Ex­ports to China ex­panded by just 1.1 per­cent while Euro­pean Union-bound goods crept up 0.4 per­cent.

Fears about Ja­pan’s trade bal­ance have also fo­cused on the sharply weaker yen — the cur­rency is down by about half against the dol­lar since Abe took of­fice in late 2012.

While the drop has boosted the prof­itabil­ity of ma­jor ex­porters, there are grow­ing con­cerns that a fur­ther drop will do more dam­age than good as it boosts the costs of bring­ing goods into Ja­pan.

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