JAKARTA (TheInsiderStories) – Japan’s trade balance turned to a deficit of JPY449 billion (US$4billion) in October on a non-seasonally adjusted basis, largely reflecting a surge in imports (up 19.9 percent y/y) outpacing exports (up 8.2 percent y/y).
On a seasonally adjusted basis, October was the fourth straight month of deficit, which widened to JPY303 billion, the highest since August 2015.
Exports to major trading partners turned positive as the impact from disruptions caused by natural disasters waned, particularly for exports to the US (up 11.6 percent y/y) driven by exports of autos, power generating machinery and other machinery. That said, export volumes grew modestly at 3.8 percent y/y, largely due to a weak rebound in export volumes to China (down 1.0 percent y/y) following an 8.7 percent y/y drop in the previous month.
A solid increase in imports was due partially to a 36.3 percent rise in imports of mineral fuel products, reflecting higher oil and LNG prices, which resulted in a surge in imports from the US. Imports of crude oil and LNG from the US jumped 983.7 percent y/y and 102.6 percent y/y, respectively.
Additionally, a wide range of goods from raw materials or intermediate goods (such as non-ferrous ores and organic chemicals) to final goods (including power generating machinery, aircraft, and clothing and accessories) drove growth in import volumes, by 10.3 percent y/y.
Harumi Taguchi, Principal Economist, IHS Markit rated, weak exports from Asia, particularly from China, reflected repercussions from US-China trade friction as the main driver of the deficit.
As the failure of Asian Pacific Economic Corporation to reach consensus indicates that the trade tension will not be solved anytime soon, sustained weakness in external demand could weigh on the rebound in economic activities in the fourth quarter and beyond, although IHS Markit expects Japan’s real GDP growth to turn positive in the fourth quarter.
The fourth consecutive month of decline in the trade surplus with the US, largely due to the increase in imports of grains and mineral fuels, could ease US complaints and call for US-Japan trade talks if this trend continues, he added.
That said, uncertainties over the US-Japan trade talks will persist, given that Japan’s trade surplus still remains large (JPY573 billion in October), partially for autos and agricultural areas.
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