TOKYO – Japan’s trade deficit nearly doubled in October, as growth in imports outpaced robust increases in exports to the U.S. and China, the Finance Ministry reported Wednesday.
A weakening in the Japanese yen over the past year has helped exports, but it has also increased the cost in yen terms for imports, especially of oil and natural gas to help offset the loss of generation capacity from nuclear plants idled after meltdowns in 2011 at the Fukushima Dai-Ichi nuclear power plant.
A 68 per cent increase in costs for imported crude oil in October helped push the trade deficit up 96 per cent over a year earlier to 1.09 trillion yen ($10.9 billion), the preliminary customs data showed. Imports surged 26 per cent year-on-year to 7.2 trillion yen ($72 billion), while exports climbed nearly 19 per cent to 6.1 trillion yen ($61 billion).
It was the 16th straight month of deficits, which also reflect lacklustre demand for exports thanks to a slowdown in growth in China and other developing economies.
In yen terms, Japan’s vehicle exports jumped 24 per cent over a year earlier. Exports of chemicals, machinery and electronics also rose at a double-digit pace. But the offshoring of much of Japan’s manufacturing is increasing the costs for industrial components such as semiconductors and optical lenses, further eroding net export growth. Imports of electronics rose 28 per cent.
Trade trends over the past year illustrate the challenges Prime Minister Shinzo Abe faces as he seeks to reinvigorate the economy with a combination of lavish spending, monetary easing and economic reforms that so far have yet to materialize but are meant to sustain growth in the longer run by improving Japan’s waning competitiveness.
The weaker yen has fattened the bottom lines, especially in yen terms, of many major companies who earn a large share of their profits overseas. But it also has raised costs for energy and for many other imports of both industrial and consumer goods.
Abe has vowed to restore Japan’s “monozukuri” manufacturing sector, to help restore the country’s economic power and retain relatively well-paying jobs that have supported strong consumer demand in the past. But Japanese corporations continue to move operations overseas, seeking lower costs and proximity to faster growing markets.
“The shrinking of manufacturing industries is inevitable because of the growth in the newly industrialized countries,” Yukio Noguchi, an adviser to the Institute of Financial Studies at Tokyo’s Waseda University.
“The Abe government tries to prevent the shrinking of the manufacturing industry, but this is mistaken because this cannot be done,” Noguchi said.
The United States remained Japan’s biggest export market, with shipments rising 26 per cent from the year before to 1.16 trillion yen ($11.6 billion), while exports to China climbed 21 per cent to 1.15 trillion yen ($11.5 billion).