Japan’s trade deficit ballooned to a record in the first half of the year as exports fell further in June, data showed today, ramping up pressure on the central bank to unveil fresh measures to boost the economy.
The figures come days after the government cut its fiscal year growth forecasts, blaming weak exports and a jump in imports as well as the negative impact of an April sales tax hike on consumer spending and business confidence.
Japan has seen widening trade deficits since the Fukushima nuclear crisis in March 2011 forced it to switch off its atomic reactors and turn to pricey fossil fuel imports to plug the energy gap.
The price of imports has surged thanks to a slide in the yen since Prime Minister Shinzo Abe pledged in late 2012 to launch a spending and monetary easing drive to kickstart growth and defeat deflation.
However, the weaker yen—which has lost about a fifth of its value against the dollar since late 2012 — has not had the desired effect on exports, leading to ever-widening trade gaps.
Thursday’s data from the finance ministry showed the country logged a record 7.60 trillion yen ($74.7 billion) deficit for the first six months of the year, expanding 58 percent from a year earlier.
The half-year figures were released with June data that showed the monthly deficit more than quadrupled to 822.2 billion yen from 180.5 billion yen a year earlier and blowing past market expectations of 684.7 billion yen.
Japan has now logged 24 consecutive monthly trade deficits.
Last month, exports fell 2.0 percent year on year to 5.94 trillion yen while imports rose 8.4 percent to 6.76 trillion yen.
The data showed that shipments to the key US market turned down, while demand for Japanese products in Asia also fell, despite a slight uptick in China.
— Focus on central bank —
The lacklustre figures will likely turn the focus on the Bank of Japan, which is undertaking a multi-billion-dollar monetary easing programme to stimulate the economy.
At its most recent policy meeting this month the central bank said the economy was still holding up despite April’s sales tax rise and a closely watched report showing business confidence in April-June suffered its first deterioration in six quarters.
The BoJ’s asset-purchasing scheme is a key plank of Abe’s three-pronged plan to kickstart the economy—dubbed “Abenomics” — that also includes huge government spending, largely on public works.
The drive has given a jolt to the insipid economy and drove a stock market rally last year, but Abe has so far made little progress on the so-called third prong—promised economic reforms, including shaking up rigid labour markets.
There is growing speculation that the BoJ—which recently cut its own growth forecasts—will have to launch further easing measures to prop up the economy later in the year.
However, analysts said there were some positives from Thursday’s data. Despite the weak figures, the deficit for June was down from May’s shortfall, and below levels seen before Japan’s consumption tax hike on April 1.
“Net trade has been a drag on GDP growth ever since the launch of Abenomics, but the sharp narrowing of the trade deficit after the sales tax hike suggests that it should finally add to growth in the second quarter,” said Marcel Thieliant of Capital Economics.
He added that while the yen may continue to weaken against the dollar, a likely fall in global energy prices should help narrow Japan’s trade deficit.
Tokyo is also trying to restart a pair of atomic reactors in the country’s south, which could further reduce its dependence on pricey imports, Thieliant said.
Nuclear once supplied more than one quarter of the resource-poor country’s energy.