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Japan logs record red ink in January due to energy imports and slower export growth
- Mar 8, 2023
Growth in exports was far slower than that of imports, partly because Japanese firms curbed China-bound shipments due to the Lunar New Year holidays. This translated into a whopping ¥3.18 trillion trade deficit, double the figure of a year prior.
The current account, one of the widest gauges of international trade, fell into the red for the first time since October, despite a record primary income surplus on higher foreign investment returns.
Comparable data became available in 1985, except for trade figures that date back only to 1996. Japan's largest previous current account deficit was in 2014, at ¥1.46 trillion.
Imports jumped 22.3% to ¥10 trillion, boosted by a rise in the value of coal and liquefied natural gas imports. Exports rose 3.4% to ¥6.82 trillion, helped by auto shipments.
Higher costs of imported energy, amplified by the yen's depreciation against the dollar and other currencies, cut into Japan's national wealth in recent months, at a time when exports have benefited from a recovery in overseas demand as the global economy recovers from the fallout from the COVID-19 pandemic.
"The current account balance is expected to return to the black in the coming months but exports will likely struggle in the current business year (to March) because of slowing overseas demand and a delayed recovery in auto production," said Shinichiro Kobayashi, a senior economist at Mitsubishi UFJ Research and Consulting.
"For now, expectations are that China's economy will get a boost from the end of the "zero-COVID" policy and the U.S. economy will remain resilient, which will lead the trade deficit to shrink. Another factor to watch is how crude oil prices and the yen will move, given their strong impact on imports," Kobayashi added.
The yen was 13.4% weaker in January than a year earlier against the dollar and 8.2% weaker against the euro.
A weaker yen cuts both ways, inflating import costs but also the value of returns on foreign investments by Japanese firms and overseas profits made by Japanese exporters when repatriated.
Primary income came to a surplus of ¥2.29 trillion, reflecting higher interest income amid rising overseas bond yields, the ministry data showed.
Overseas bond yields have been rising on expectations that major central banks, including the U.S. Federal Reserve, will continue to raise interest rates, though concerns have grown that aggressive hikes will slow economic growth.
Japan reported a smaller service trade deficit of ¥758.4 billion than a year earlier, due to a roughly fourteenfold increase in the travel surplus to ¥177.9 billion.
A travel surplus is achieved when the amount of money spent by foreign visitors in Japan exceeds what Japanese spent overseas.
Nearly 1.5 million foreign nationals visited Japan in January, helped by the easing of strict border control steps implemented in response to the COVID-19 pandemic. The number is still roughly half of pre-pandemic levels.
Japan logs record red ink in January due to energy imports and slower export growth
Growth in exports was far slower than that of imports, partly because Japanese firms curbed China-bound shipments due to the Lunar New Year holidays.
