Rising import costs due to surging oil, gas prices cause big trade deficit in Jan
FACED with slowing demand in the US market, Japan’s exports still managed to improve last month on the back of solid sales to other parts of Asia and to Europe.
But surging oil and natural gas prices pushed the country’s import costs up sharply in January, resulting in an unexpectedly large trade deficit for the month.
The slowdown in the US economy in the wake of the sub-prime mortgage crisis has aroused fears that Japanese exports could take a bad knock, inflicting damage on the economy or even pushing it into recession.
But so far, global demand for Japanese motor vehicles, electronics and other key exports is holding up quite well, data published yesterday showed.
While exports to the US market fell by 3.2 per cent in January, marking their fifth consecutive monthly decline, those to China (which is now Japan’s leading export destination) rose by 4.6 per cent, and the net result was that overall exports for the month rose by 7.7 per cent to 6.41 trillion yen (S$83.6 billion).
But imports jumped by 9 per cent for January to 6.49 trillion yen as oil and natural gas prices surged.
The result was that Japan suffered a near-80 billion yen trade deficit – its biggest in two years.
Economists had predicted a 35 billion yen trade surplus for the month, and some warned that with fuel costs still rising Japan could suffer even larger deficits from now on.
Another reason for caution about the trade picture is that while exports to China are still robust and growing, the rate of growth is slowing, analysts said.
While sales of Japanese motor vehicles to China remain strong, demand for Japanese electronic products in China is weakening, yesterday’s data showed.
The relatively strong trade picture in January came after data last week showed that Japan’s economy expanded at a much more rapid rate than expected 3.2 per cent on an annual basis during the final quarter of last year.
Even so, economists say that the real test of the resilience of the economy will come in the first half of this year as the full impact of the sub-prime crisis is felt by the global economy, including that of China.
Source: Business Times 22 Feb 08