Japan’s trade deficit swelled to a record 1.63 trillion yen ($17.4 billion) on energy imports and a weaker yen, highlighting one cost of Prime Minister Shinzo Abe’s policies that are driving down the currency.
Exports climbed 6.4 percent in January from a year earlier, the first rise in eight months, exceeding the median 5.6 percent estimate in a Bloomberg News survey of 24 economists. Imports increased 7.3 percent, the Finance Ministry said in Tokyo today.
Weakness in the yen that aids exporters such as Sharp Corp. and Sony Corp. also means the country pays more to import fossil fuels needed as nuclear reactors stand idle after the Fukushima crisis in 2011. That burden may encourage the government to limit the currency’s slide, with Deputy Economy Minister Yasutoshi Nishimura signaling in a Jan. 24 interview that the government may prefer a yen stronger than 110 per dollar.
“The trade deficit means the yen can’t just keep weakening,” said Takeshi Minami, chief economist at Norinchukin Research Institute Co. in Tokyo. “Abe will probably restart some nuclear plants after the upper house elections in July as, without them, the costs to the economy are too great.”
Nearly 80 percent of Japan’s imports were denominated in foreign currencies in the second half of last year, compared with about 60 percent of exports, according to the Finance Ministry.
[Some] Export Increase
Exports to China rose 3 percent from a year earlier, the first increase since May, while those to the U.S. gained 10.9 percent, today’s data showed. Shipments to the European Union fell 4.5 percent.
“A rebound in global demand, especially the U.S., is helping Japanese exports,” Azusa Kato, an economist at BNP Paribas SA in Tokyo, said before the data.
China Trade
Japan’s government predicts that trade with China, the nation’s biggest export destination, will recover this year after falling in 2012 for the first time in three years because of a territorial dispute between the nations and a slowdown in the Chinese economy.
Japan’s car exports declined 8 percent from a year earlier, while iron and steel shipments increased 24.4 percent. Imports of liquefied natural gas rose 1 percent from a year earlier to the highest since at least May 1999. The average price paid by Japan for a metric ton of natural gas has risen almost 17 percent in yen terms since November, according to Bloomberg calculations based on Ministry of Finance data.
The yen has fallen more than 13 percent against the dollar in the past three months as Prime Minister Shinzo Abe calls for aggressive monetary easing to end deflation.
Questions:
1. Why did Japan experience an increase in exports, but not a decrease in
imports after the yen was devalued? What does this mean for the trade balance?
2. What imported good is driving this trend, and what does this mean about
Japan’s elasticity towards this good?
3. Do you think the deteriorating trade deficit a long term trend? Draw a graph to
illustrate what you think might/should happen to the trade balance in the long run. Be very careful to explain the reasons for your preditions regarding the the shape of the trade balance in the future.
4. Describe the major
thesis, the central idea, or set of ideas in the reading.
5. Identify a concept presented in the article, define or describe it,
and compare or contrast it to an idea that you have read about in any other
article. Discuss how they are similar or different, and how they are related to
each other.
6. Citing specific lines in the article, quote verbatim a statement
or brief passage that is interesting to you or elicits in you some type of
emotional response. Then identify your emotional response or why you
found it interesting, describe the meaning(s) that the statement or
passage has for you, and provide actual or possible reasons for your
response.
