Japan’s imports continued to surge, driven by soaring energy prices and a weaker yen, extending a sequence of trade deficits to an eighth-straight month as export gains slowed.
Imports jumped 31.2% from a year ago on higher oil, coal and gas prices, compared with a 28.9% rise forecast by analysts. A stronger expansion of chip-making shipments supported continued gains in exports, but a fall in auto shipments dragged on the pace of gains.
While the trade deficit narrowed to 412.4 billion yen ($3.2 billion), the streak of shortfalls is the longest since early 2015, providing another possible reason for yen selling as Japan’s currency continues to slide against the dollar.
The yen’s sharp drop to a 20-year low since March will compound the impact of energy prices that are fueling Japan’s trade shortfall in coming months. The continued gains in exports are unlikely to be enough to outweigh imports and support a fragile economy that is expected to have contracted slightly in the first quarter.
“Trade will be pretty much neutral for growth in the first quarter,” said economist Yuichi Kodama at Meiji Yasuda Research Institute. “With the Ukraine situation weighing on the global economy and China expected to slow down, I don’t think exports can be a growth driver going ahead.”
What Bloomberg Economics Says…
“The trade report for March shows yen weakness becoming a real problem for the economy…the country is still saddled with a hefty trade deficit that will weigh on 1Q growth more than consensus estimates. .”
—Yuki Masujima, economist
A weaker yen usually bodes well for the economy by making exports more competitive and boosting the value of overseas earnings. But policy makers are increasingly pointing to negative impacts of costlier imports and higher energy bills for consumers. It also boosts the cost of materials that companies buy abroad, crimping their profit margins.
“Energy prices themselves are surging, but people tend to blame a weaker yen for exacerbating the rise,” Kodama added. “The government has no choice but to keep explaining the rises in energy costs and adding measures to help people cope with it.”
Prime Minister Fumio Kishida has already boosted fuel subsidies to help households cope with higher gasoline prices. He is expected to announce further economic measures in the coming days to ease the pain of rising prices.
The March data showed the value of Japan’s overseas shipments rose 14.7% from a year earlier compared with economists’ estimate of a 17.1% increase. Seasonally adjusted, exports rose 1.7% in March from the previous month after falling in February.
Japan’s exports are susceptible to risks in major markets. As China’s virus lockdowns stoke concerns about a slowdown, that nation reported its biggest decline in consumer spending and highest unemployment rate since the early months of the pandemic. In the U.S., there is a risk that aggressive interest rate hikes to combat inflation may cool demand.
Gains in the value of shipments to China sharply cooled to 2.9% from 25.8% in February. Exports to the U.S. rose 23.8%, while exports to Europe climbed 16.8%.
