Japan on Wednesday posted its 20th straight monthly trade deficit in February, but analysts welcomed the fact that the figure had narrowed from a record shortfall in January as export growth outpaced imports.
The latest data indicate the impact of a weak yen and post-Fukushima energy imports is starting to ease, soothing concerns about Japan’s economic recovery.
The finance ministry said Japan logged a 800.3 billion yen ($7.9 billion) trade deficit in February, up 3.5 percent year on year. That came as exports rose 9.8 percent to 5.8 trillion yen, while imports grew 9.0 percent to 6.6 trillion yen.
But while it marked the 20th successive month in the red — the longest spell in more than three decades — it was a sharp fall from January’s 2.79 trillion yen shortfall.
The country also posted a record deficit for 2013 as the weakening yen, while good for exporters, sent energy bills soaring.
“The effects of the weaker yen appear to be wearing off, as can be seen in how import costs have stabilised,” said Hideki Matsumura, senior economist at the Japan Research Institute.
“And growth in import volume also appears to be settling down. When considering all this, it’s likely that we may have reached the peak in trade deficits, and we could see the red shrink gradually.”
The data will come as good news for Prime Minister Shinzo Abe’s bid to kickstart growth as Japan prepares for a sales tax hike next month that critics warn could dent a nascent recovery as prices rise and consumer spending drops.
– Deficit may spike on tax-hike buying –
A recent poll by Kyodo News showed nearly three-quarters of Japanese people felt no effect from Abe’s spending-and-easy-money blitz.
Critics say Abe has yet to follow through on structural reforms to the economy, including shaking up labour markets, signing up free-trade deals and bringing more women into the workforce.
“The sharp fall in the trade deficit in February is welcome, and the shortfall may narrow slightly further in coming months,” London-based Capital Economics said.
However, it added that, seasonally, the trade deficit tends to drop off in February “so this smaller shortfall is not necessarily something to get excited about”.
“The trade deficit may spike briefly in March due to last-minute spending ahead of April’s increase in the consumption tax, before narrowing sharply once the tax has been raised,” it added.
Japan shut down all of its nuclear reactors in the wake of the worst atomic accident in a generation, an energy source that once supplied more than one quarter of Japan’s needs.
Those imports are made all the more expensive as the yen sharply declined after the launch of Abe’s policy drive, which meshes big government spending and massive central bank monetary easing.
The latter tends to weigh on the currency, which is good news for the profitability of Japanese exporters, but it makes imports costlier. The biggest beneficiaries of a weak yen tend to be auto giants such as Toyota, as well as electronics and steel producers.
— Dow Jones Newswires contributed to this report —