JAKARTA (TheInsiderStories) – Japan’s trade deficit widened to JPY737 billion (US$6.6 billion) in November on a non-seasonally adjusted basis, largely reflecting solid growth in imports (up 12.5 percent in annual basis, which outpaced exports up 0.1 percent year on year (YoY), Statistic Bureau reported today (12/19).
On a seasonally adjusted basis, the trade deficit widened to JPY492 billion in November — largest since February 2015 — marking the fifth straight month of deficit.
The weakness in exports reflected declines in exports of semiconductor machinery, electrical machinery including mobile phone and parts of audiovisual appliances, and scientific optical instruments, which offset increases in exports of ships, chemicals and other products. While exports to the US (up 1.6 percent YoY) and the European Union (up 3.9 percent YoY) softened.
Exports to Asia declined 1.9 percent YoY, largely because of declines in exports to South Korea (down 9.3 percent YoY) and Hong Kong (down 8.9 percent YoY) and milder growth in exports to China (up 0.4 percent YoY).
On the other hand, a solid increase in imports largely reflected higher prices of oil and other resources. The contribution of mineral fuels to the import growth remained high (7.8 percentage points). Increased imports of power generating equipment and other machinery suggest a recovery in fixed investment.
Harumi Taguchi, principal economist at IHS Markit rated, the
recent drop in oil prices and their softer outlooks could suggest Japan’s trade deficits narrow. However, a weaker OECD leading indicator, the global purchasing manager’s index, calculated by the research company, and declines in export orders of machinery tools suggest sluggish exports over the near term.
The front-loaded demand from Asia ahead of higher tariffs by the United States (US) on imports from China has diminished and this contributed to Japan’s weak exports in November. This could continue to weigh on Japan’s exports, particularly if US – China trade talks are not successful.
Meanwhile, Japan’s trade surplus with the US has declined for the fifth consecutive month, driven by increase in imports of cereals and petroleum products and weaker exports of autos. This could be favorable to Japan, allowing to avoid tough negotiations at US-Japan trade talks expected to be held in early 2019.
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