Japan Has Surprise Deficit as Import Growth Beats Exports

Japan had a surprise trade deficit in May, as stronger-than-expected imports overpowered the best export growth in more than two years.

Key Takeaways

Japan’s trade has seen a sustained pickup since the start of the year, with five consecutive months of growth in both exports and imports. It’s indicative of an increasingly healthy global economy and a relatively competitive yen. The Bank of Japan has expressed optimism that private consumption will join exports in helping drive Japan’s economic recovery.

Economist Views

  • "Exports are solid. Today’s report confirms that the shipments will continue to drive Japan’s economy in coming months, feeding gradually to capital spending and household spending," said Takeshi Minami, chief Japan economist at Norinchukin Research Institute.
  • Japanese exporters are benefiting from a global production recovery, and the trade deficit is "mainly because of a rise in imports, reflecting Japan’s resilient economy," Minami said.
  • "Export volumes increased for a fourth straight month. That showed exports are growing steadily and external demand is a leading factor in the Japanese economy," said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo.
  • There’s no weak spot among major regions globally and all are heading toward recovery, which is helping Japan’s exports, Kodama said.

Other Details

  • The Finance Ministry said that Japan often experiences deficits in May, as exports slow relative to imports due to a string of national holidays early in the month.
  • Price and currency changes raised the value of energy imports. The import volume of liquid natural gas rose 13 percent from a year ago, while the value jumped almost 69 percent. Coal and oil were similarly affected.
  • Exports to China, Japan’s largest trading partner, climbed 23.9 percent from a year earlier.
  • Those to the U.S. rose 11.6 percent.
  • Shipments to the EU increased 19.8 percent.

    Highlights

    • Exports rose 14.9 percent from a year earlier (estimate +16 percent), according to data released by the Ministry of Finance. Part of that was a rebound from weak shipments last year caused by the Kumamoto earthquake in April 2016.
    • Imports increased 17.8 percent (estimate +14.5 percent), the biggest rise in more than three years.
    • The trade deficit was 203.4 billion yen ($1.8 billion) (estimate +43.3 billion yen).

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