Japan ran its biggest single-month trade deficit on record in August as imports surged on high energy costs and a slump in the yen, exposing the economy’s vulnerability to external price pressures.
The growing trade deficit highlights the fragile nature of Japan’s economic recovery which has so far largely remained intact despite a high price tag firms are paying for imports that is aggravated by the yen’s slide to a 24-year low and rising prospects of a global slowdown.
Imports jumped 49.9% in the year to August, driven by costs of crude oil, coal and liquefied natural gas (LNG), and causing the trade deficit to swell to 2.8173 trillion yen ($19.71 billion), the biggest shortfall on record.
The gain in imports was bigger than a median market forecast for a 46.7% rise in a Reuters poll and outstripped a 22.1% year-on-year increase in exports in the same month, the Ministry of Finance data showed.
“Imports are on the rise as high raw material prices continued and supply disruptions eased, while exports are sluggish,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“Costs will rise if imports go up without any change to the size of the global economy. It will lead to the importing of inflation.”
August’s trade gap marked the 13th consecutive month of year-on-year shortfalls and was bigger than the 2.3982 trillion yen deficit expected in a Reuters poll.
The yen’s fall by nearly 20% over the past six months added to higher import costs, aggravating already high costs of energy and raw materials.
Oil imports from the United Arab Emirates and coal and LNG from Australia strongly drove up overall imports.
By region, exports bound for China, Japan’s biggest trading partner, grew 13.5% year-on-year in value terms on stronger shipments of motor vehicles such as hybrid cars to the country.
Shipments to the world’s biggest economy the United States expanded 33.8% in August largely due to stronger motor vehicle and parts exports.
Exports, however, declined 1.2% in volume terms, the data showed.
“Exports aren’t growing on a volume basis even though the yen has weakened so much. That will be hard for corporate profitability unless the global economy starts expanding and exports increase,” said Minami.
Japan’s economy grew for a third straight quarter in April-June, data last week showed, as the lifting of local COVID-19 restrictions boosted consumer and business spending.
Analysts say, however, that the country’s recovery remains fragile as consumer and business activity face risks such as from a global growth slowdown and a tightening of monetary policy by many central banks around the world.
($1 = 142.9700 yen)
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