Japan trade deficit narrows sharply from record as imports slow

JAPAN’S trade deficit narrowed sharply in February from the previous month’s record shortfall, as the impact from the Chinese New Year in China reversed, slowing imports and encouraging exports.

The trade gap shrank to 897.7 billion yen (S$9.13 billion) from 3.5 trillion yen in January, the finance ministry reported on Thursday (Mar 16), coming in below analyst forecasts. Imports rose 8.3 per cent from a year ago, decelerating from the previous month on a slowdown in energy shipments. Exports climbed 6.5 per cent as cars pushed up gains.

The reversal of impacts from January’s Chinese New Year holidays meant that China was a lead cause behind the narrowing of Japan’s trade deficit last month. But a jump in exports to the rest of the world also signalled a more solid recovery for the world’s third-largest economy, after it narrowly avoided a recession at the end of last year.

“China’s PMI showed a recovery of production activity after the reversal of its Zero Covid policy, likely boosting Japanese exports to China,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities. “The Japanese economy is expected to continue its gradual recovery, with progress in the ‘with-covid’ lifestyle, rebounding inbound demand, and easing supply restrictions.”

Thursday’s trade report showed exports to the US was up 14.9 per cent from the previous year, while those to Europe gained 18.6 per cent, both gaining pace from the previous month. Shipments to China fell 10.9 per cent, slowing from February’s 17.1 per cent decline.

Still, February saw the 19th consecutive month of trade deficit, highlighting Japan’s long struggle to recover from the impact of Covid amid a weaker yen and higher oil prices.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Economists also warn of multiple downside risks ahead, including uncertainty over the impact from global interest rates hikes as central banks continue to fight inflation around the world.

The outlook is further clouded by the collapse of Silicon Valley Bank and a full-blown crisis brewing at Credit Suisse Group, with some of the world’s biggest banks racing to shield their finances from the potential fallout. BLOOMBERG