TOKYO: Japan’s weakest export growth in a year spurred a wider-than-forecast trade deficit in March, adding to challenges for Prime Minister Shinzo Abe in steering the economy through the aftermath of an April 1 sales-tax rise.
The 1.8 percent rise in shipments overseas from a year earlier, reported today by the Ministry of Finance, compared with a 6.5 percent median estimate of 27 economists in a Bloomberg News survey. An 18.1 percent jump in imports helped widen the deficit to the biggest ever for the month.
Exports by volume fell the most since June last year, suggesting external demand may fail to provide much support for an economy set to contract this quarter.
A spending spree ahead of the tax increase boosted imports, already swollen by a surge in energy costs due to the yen’s slide and nuclear shutdowns.
“In spite of the continued weaker yen, the performance of Japanese exporters is quite weak compared to competitors like Korea or Taiwan,” said Junko Nishioka, chief Japan economist at Royal Bank of Scotland Group in Tokyo. The trade balance will deteriorate “unless the government decides to restart nuclear power plants,” she said.
The rush demand ahead of the tax increase could have prompted companies to divert shipments to the domestic market, rather than overseas, crimping export growth, said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo.
Abe’s drive to shake off more than a decade of deflation and economic drift helped drive down the yen, boosting profits of exporters such as Toyota even as shipment volumes remain sluggish. Export volumes fell 2.5 percent in March from a year earlier.
At the same time, the Japanese currency’s 19 percent drop since Abe came to power in December 2012 has boosted import values, contributing to 21 straight monthly deficits — the longest slide in comparable data back to 1979.
The Bank of Japan is forecast to add to already unprecedented easing to cushion the economy from the sales-tax increase and keep inflation on track to its 2 percent target.
Weakness in exports could be a potential trigger for more easing in July, according to JP Morgan Chase economist Masaaki Kanno.
The deficit quadrupled from a year earlier to 1.45 trillion yen ($14.1 billion), larger than a 1.08 trillion yen projection by economists. On a seasonally adjusted basis, the deficit grew to 1.71 trillion yen.
“Japan’s trade deficits may continue for at least three years,” said Muto, citing high energy costs and reduced potential for exports.
Other data Monday showed sluggishness in the nation’s corporate sector. Demand for loans from Japanese companies decreased in April from three months earlier, a BOJ survey showed.
Japan’s ruling Liberal Democratic Party is considering loosening restrictions on lenders to make it easier for small businesses to procure funds, the Nikkei newspaper reported on April 19.
While department store sales in March soared the most since at least 1991, Abe now has to ensure domestic demand doesn’t tail off with shoppers having to pay more for goods because of the higher sales levy.
Consumer confidence fell in March for a fourth straight month to 37.5, down from 45.7 in May last year — the highest point during Abe’s current term as prime minister.
The government this month cut its assessment of the economy for the first time since November 2012.