Japan returns to trade deficit in May

AFP

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Japan fell into a trade deficit in May, the first since January, the Finance Ministry said Monday, as renewed yen strength pressured exports.

Japanese exports fell for all major regions, including the nation’s biggest trading partner China, as concerns linger over a slowdown in the largest Asian economy as well as other emerging markets.

The government of Prime Minister Shinzo Abe has actively attempted to talk down the yen’s strength, with ministers repeatedly suggesting that Tokyo could step into the market to weaken the currency, as they rush to safeguard the fragile economy ahead of a July parliamentary election.

A rising yen dents Japanese exports by making the country’s products more expensive in overseas markets and thus less competitive.

The currency, often seen as a safe haven, has broadly gained in recent months, partially on fears over the state of the global economy and more recently on concerns over a possible British exit from the European Union in a referendum this week.

Abe was also preparing to launch further stimulus, as his controversial big-spending and easy money policy blitz, known as “Abenomics,” has failed to pull Japan out of its prolonged economic malaise more than three years after the programs began.

“The stronger yen lowered export revenues and rising energy prices lifted import values,” said Marcel Thieliant, senior Japan economist at Capital Economics.

Expected recovery of oil prices should pull Japan into further deficit in the future, he said.

For May, Japan logged a deficit of ¥40.72 billion, compared with a trade surplus of ¥823.18 billion in April, as exports of steel and semiconductors declined, the ministry said.

However, it was smaller than the deficit of ¥215.35 billion seen in May 2015.

Exports fell 11.3 percent, marking the eighth straight monthly decline, with the rising yen blamed as “the main reason,” Thieliant said.

The value of steel shipments dropped 24.1 percent, while electronic parts such as semiconductors shrank 20.0 percent, the ministry said.

China-bound exports fell 14.9 percent, led by a dip in optical equipment exports such as lenses, while imports fell 9.7 percent, leaving a trade deficit of ¥401.1 billion, according to the ministry.

Major brokerage SMBC Nikko Securities said the trend of moderate recovery in exports remained intact, despite May’s decline, thanks largely to a solid U.S. economy.

IT product inventories in the U.S. market have started to fall, leading to inventory adjustment in Taiwan and elsewhere in Asia, said Junichi Makino, chief economist at the brokerage.

(AFP)