Trade deficit of Japan back again, climbs to $5.7 billion

Japan posts trade deficit in January

A trade deficit this month was the first in 22 months for Japan due to factors like weak exports to China and higher import costs.

Instead of registering a surplus worth 49.6 billion yen in line with expectations, Japan posted a deficit of $471.4 billion yen or $5.7 billion in January. Just a month earlier, the country reported a 725.85 billion yen surplus which was an increase of 33.8 percent year on year.

The trade deficit can widen in the coming months because of skyrocketing oil prices, economists warned. A stagflation is a real possibility, if a tepid local economy persists while prices keep rising. January imports increased 12.4 percent to 5.443 trillion yen, or 6.8 percent higher in yen-based trade or 17.9 percent in dollar-based trade one year earlier.

Some economists believe that the rise in imports was temporary and demand for oil will soon fall. Japanese economic minister Kaoru Yosano was one of several Cabinet members who said that the current strength of the yen defrayed higher costs. But in the long term, a strong yen will hurt Japan's economy which is export-driven. An appreciating yen devalues Japanese exports in overseas markets.

According to an official from the finance ministry, business was muted in January because of the New Year celebration in Japan earlier that month and the Lunar New Year celebration in China in early February. Analysts are confident that exports will pick up again in the next few months to reverse the effect of last month's trade deficit.

Posted by James Fried on Wednesday February 23 2011, 3:50 AM EST. Ref: WSJ. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0