Trade deficit widens to ¥268.1 billion as export growth slows

Japan had a merchandise trade deficit of 268.055 billion yen in July, the Ministry of Finance said on Wednesday.

China-bound shipments were off 1.3% from 12 months earlier in volume terms, outstripping a 0.4% fall to the rest of Asia.

Economic slowdown in China, which accounts for about a fifth of Japan’s exports and imports, have weighed on Japan’s economy in recent months.

Imports fell 3.2 per cent in year-on-year in July versus the median estimate for a 7.9 percent annual decrease as the cost of crude and liquefied natural gas fell. “China is dragging down exports”.

“Commodity exporters are the worst hit given China’s heft in commodities, but there is also little doubt that Asian manufacturing exporters have also fared poorly, even in the face of an entrenched U.S. recovery”, the Mizuho report said. However, imports have not fallen as much as expected, with weakness in the yen countering that trend. Economists had predicted the shortfall would shrink to around 53 billion yen.

The news comes amid growing concerns over the outlook of the Japanese economy, which shrank 0.4% in the April to June period on the back of tepid household spending and sluggish exports.

Shipments to the United States, whose economy has been on a recovery track, grew 18.8 percent to 1,340.8 billion yen for the 11th straight monthly gain, while imports from the country rose 7.5 percent to 693.9 billion yen.

Prime Minister Shinzo Abe’s government has nudged major companies into raising wages for the past two years in the spring with a series of meetings with major business lobbies and labour unions.

This month, Kuroda said he would consider expanding the bank’s record 80 trillion yen annual asset-buying scheme – a means to pump money into the economy similar to the US Federal Reserve’s quantitative easing – if weak oil prices keep holding back near-zero inflation.