Image: Reuters Berita 24 English - In May, Japan recorded its largest single-month trade imbalance in more than eight years, as rising commo...
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| Image: Reuters |
Berita 24 English - In May, Japan recorded its largest single-month trade imbalance in more than eight years, as rising commodity prices and a weakening yen boosted imports, casting a pall over the country's economic prospects.
The expanding trade deficit highlights the challenges facing the world's third-largest economy, which include a weakening yen and rising fuel and raw material costs, which domestic industries rely on for production.
Imports increased 48.9% in the year to May, according to Ministry of Finance data released on Thursday, above the median market prediction of 43.6 percent in a Reuters poll.
This outperformed a 15.8% increase in exports in the same month, resulting in a trade deficit of 2.385 trillion yen ($17.80 billion), the biggest in a single month since January 2014.
Harumi Taguchi, principal economist at S&P Global Market Intelligence, said, "The weak yen is a major driver for the growth in imports."
"However, there will be a lag before it benefits exports," she added, noting that components supply shortages and China's rigorous coronavirus lockdowns hampered shipments to the US and China.
May's deficit, which was the second worst in a single month on record, was greater than the 2.023 trillion yen difference predicted in a Reuters poll. It was the 10th consecutive month of year-on-year shortfalls.
Exports to China, Japan's largest trading partner, fell 0.2 percent in the year to May due to lower shipments of machinery and transportation equipment.
In May, shipments to the United States, the world's largest economy, increased by 13.6 percent, owing to higher exports of machinery and mineral fuels, however motor vehicle shipments declined.
"Even if the weak yen provides some benefits, it's difficult to expect a substantial increase in exports, therefore exports are unlikely to reduce the trade imbalance," said Atsushi Takeda, chief economist at Itochu Economic Research Institute.
Larger shipments of oil from the United Arab Emirates, as well as coal and liquefied natural gas from Australia, drove increased overall imports, according to the data.
Despite the fact that Japan's economy is forecast to grow by 4.1 percent on an annualised basis this quarter as the coronavirus outbreak fades, a drop in the yen threatens to dampen consumer optimism as higher fuel and food costs hit families.
According to a private study released this week, nearly half of Japanese companies believe a weak yen is negative for their business, implying that the currency's losses are affecting business mood.
(1 dollar Equals 133.9800 yen)
