Japan’s Trade Deficit Narrows On Weak GDP Data
$OIL, $CS
Japan’s trade deficit narrowed 72.3% in July from a year earlier to JPY268.1-B ($2.2-B), marking the 4th month of deficit as energy import costs continued to decline, but while the value of exports expanded, the volume dropped, the finance ministry said Wednesday.
According to the ministry, the JPY268.1-B deficit was markedly below the JPY966.5-B a year earlier, with July’s figure coming in well below median analysts’ expectations.
The value of exports rose for the 11th month running in the recording period by 7.6% to JPY6,663.8-B, owing to the Yen’s depreciation helping shipments of vehicles, but the overall volume of shipments retreated 0.7% due to a slowdown in emerging economies, the government report said.
Exports to the United States increased 18.8% to JPY1,340.8-B, the ministry said, with imports from the US up 7.5% to JPY693.9-B.
Exports to China expanded 4.2% to JPY1,179.7-B, while imports from the country were up 13.5% to JPY1,652.6-B,.
The value of imports fell for the 7th straight month in July by 3.2% to JPY6,931.8-B, as falling energy prices continue to support the nation that still has all but one of its commercial nuclear reactors off-line in the wake of the Y 2011 disaster in Fukushima and is highly reliant on the purchasing of fossil fuels.
The ministry said that in the recording period, imports of Crude Oil dropped for the 12th straight month by 24.6%, as the global price decline for Cruse Oil fell 42.8% from a year earlier.
The worse-than-expected trade figures come on the heels of weak GDP data released Monday showing Japan’s economy shrank at an annualized pace of 1.6 percent in the April-June quarter as consumption dropped and exports weighed.
The news has put renewed pressure on the government of Prime Minister Shinzo Abe to turn economic policy into fiscal realities and for the Bank of Japan (BOJ) to decide how it intends to continue to underpin the economy, including possibly rolling out new easing measures.
Economists said that as well as the latest GDP figure also coming in below median analysts’ forecasts and translating to a 0. 4 percent fall from the previous quarter on an inflation-adjusted basis, it also marked the 1st contraction in 3 Quarters for the world’s third-largest economy.
A slowdown in Asian markets has also taken its toll, leading economists here said, but slumping domestic consumption and falling output as demand drops where the mainstays leading to the contraction market analysts said, adding that Japan has yet to fully recover from last year’s 3 percent tax hike from 5 to 8 percent in April, as Abe’s aggressive “Abenomics” blend of economic policies has yet to fire on all cylinders.
They said the slumping GDP data was bad timing for Abe and his administration, who are experiencing an all-time low support rate from the public, hovering at around 30 percent, after ramming unconstitutional war bills through parliament recently without a public mandate, which could in theory allow the country to re-militarize and deploy troops borderlessly across the globe.
The weak GDP is a double-whammy for the unpopular Prime Minister who also lost favor after giving a globally-watched speech on the anniversary of the end of WWII, in which he failed to concretely apologize for Japan’s war time atrocities and semantically side- stepped key language that was adopted and globally-accepted by former administrations.
“If weak private consumption persists, that would be a further blow to Abe’s administration, which is facing falling support rates ahead of next year’s Upper House election,” said Hiromichi Shirakawa, chief Japan economist at Credit Suisse, adding that, ” This could raise chances of additional fiscal stimulus.”
Consumer spending, which makes up about 60% of Japan’s GDP, declined 0.8% from the previous Quarter, the cabinet office figures showed earlier this week, with sales of seasonal products, such as air conditioners, being sluggish in the recording period, contributing to a bleak overall picture of the nation’s consumption.
Smartphones and apparel also took a hit, the latest government figures showed as households continued to tighten their belts in the wake of the tax hike and over fears that “Abenomics” may not be the economic miracle “cure all” it was first pitched as being.
Compounding a lack of spending, economists here pointed out that prior to the figures being released, Moody’s Analytics had already said that, “Spring wage increases have not boosted consumer spending as much as hoped.”
As for the central bank’s moves, Takeshi Minami, chief economist at Norinchukin Research Institute, said the BOJ will now have to revise its growth GDP projections for the fiscal year, but would likely not overhaul its key policy in the coming months.
Other analysts concurred, with Yoshiki Shinke, chief economist at Dai-Ichi Life Research Institute staying: “I don’t think the BOJ will immediately ease policy further because of the GDP data, since the central bank has already factored in a negative figure. But if the economy in July-September turns out to be weak, there is a chance the BOJ will implement more easing.”
Notably, the GDP data showed that exports had dropped by 4.4%, from a 1.6% growth booked in the Q-1 and marking the 1st negative frame in 6 Quarters.
By Xiang Bo
Paul Ebeling, Editor
HeffX-LTN
The post Japan’s Trade Deficit Narrows On Weak GDP Data appeared first on Live Trading News.