Japan will run the largest trade deficit in more than eight years in May

Tokyo — Japan recorded the largest one-month trade deficit in more than eight years in May. This is because soaring commodity prices and the depreciation of the yen have inflated imports and clouded the country’s economic outlook.

The widening trade deficit highlights the headwinds facing the world’s third-largest economy due to the weak yen and soaring fuels and raw materials that domestic manufacturers depend on production.

Imports surged 48.9% in the year to May, Treasury data showed Thursday, Reuters polls exceeded the median market forecast of a 43.6% increase.

Exports in the same month increased by 15.8% year-on-year, and the trade deficit was 2.385 trillion yen ($ 17.8 billion), the largest deficit in the month since January 2014.

“The depreciation of the yen is a major factor in the increase in imports,” said Harumi Taguchi, principal economist at S & P Global Market Intelligence.

“But there will be a delay before it benefits exports,” she said, adding that cargo to the United States and China faced parts supply constraints and China’s strict coronavirus blockade. ..

The deficit in May was the second largest in the past month, the 10th consecutive month of deficit, exceeding the gap of 2.023 trillion yen predicted by Reuters’ survey.

By region, exports to China, Japan’s largest trading partner, fell 0.2% in the 12 months to May due to sluggish shipments of machinery and transportation equipment to the country.

Shipments to the United States, the world’s largest economy, increased by 13.6% in May due to strong exports of machinery and mineral fuels, although exports of automobiles declined.

Atsushi Takeda, chief economist at ITOCHU Economic Research Institute, said, “Even if the depreciation of the yen brings some benefits, it is unlikely that exports will reduce the trade deficit because we cannot expect a significant increase in exports.”

Data show that increased shipments of oil from the United Arab Emirates and coal and liquefied natural gas from Australia have significantly boosted overall imports.

As the coronavirus pandemic diminishes, the Japanese economy is expected to grow 4.1% annually this quarter, but a weaker yen could hurt consumer sentiment.

According to a private survey this week, nearly half of Japanese companies see the weak yen as bad for them. It suggests that the depreciation of the currency is hurting corporate sentiment.

By Daniel Leussink

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