Japan posted its worst ever trade deficit of $17.4 billion in January, despite a surge in exports. Recent policy measures that resutled in weakening of the yen led to an escalation in fuel import costs, official data showed.
Japan, the world’s third largest economy witnessed a pickup in exports aided by the sharp fall in the domestic currency in January. However, the weakening of the yen following a slew of measures aimed at monetary policy easing by the newly-elected Shinzo Abe government escalated the fuel import costs, which constitute a major component of Japan’s imports.
The data released by the finance ministry showed that Japan’s trade deficit for the month of January stood at 1.63 trillion yen ($17.4 billion) - the largest deficit in its history registered for a single month after the comparable data study commenced in January 1979. The previous highest deficit of 1.48 trillion yen was recorded for the same month last year. Analysts' estimate pegged the trade deficit at 1.303 trillion yen.
In January exports rose 6.4 percent from a year earlier to 4.79 trillion yen, the first increase in eight months - much above the forecast 2.6 percent increase - on higher shipments of automobile parts and other items, data showed. Exports to the United States surged by over 10 percent, while exports to the Europe declined by 4.5 percent, owing to the economic slowdown in the region.
Imports rose 7.3 percent to 6.43 trillion yen, due to huge import costs of petroleum products, liquefied natural gas and crude stemming from a depreciated yen. Japan is forced to rely on fuel imports to meet the energy needs as its nuclear reactors lie idle for almost two years now, after a disaster at one of the plants.
Prime Minister Shinzo Abe has announced an aggressive fiscal stimulus policy to boost the economy, which is mired in recession and deflation. The easing of monetary policies saw its domestic currency weaken against the dollar, boosting stocks and exports in January. However, the radical measures drew comments from South Korea and G7 countries over the Japanese government and the Bank of Japan’s interference in the forex trade.
The yen has weakened more than 15 percent against the dollar in the last two months, prompting the G7 and Japan’s trade partners to warn the country about the possibility of a currency war among the nations.
Japan’s new monetary measures figured in the recent meeting of G20 finance ministers and central bankers in Moscow. However, the group stopped short of delivering a direct warning to Tokyo over the currency issue.
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