Japan trade deficit shrinks as import growth slows

PUBLISHED : Wednesday, 21 May, 2014, 2:27pm
UPDATED : Thursday, 22 May, 2014, 1:03am

Japan's trade deficit shrank last month as imports rose the least in 16 months after the first sales tax increase in 17 years, on April 1, crimped consumer spending.

Inbound shipments rose 3.4 per cent from a year earlier, the Ministry of Finance said yesterday.

Exports increased 5.1 per cent, leaving a deficit of 808.9 billion yen (HK$61.8 billion) - 7.8 per cent lower than the figure in April last year.

Reductions in Japan's trade deficits, which extended their record run to 22 months, would help Prime Minister Shinzo Abe's efforts to drive a sustained economic recovery and an exit from deflation.

So far, export gains have been limited, even with a 17 per cent slide in the yen against the US dollar since he took office in December 2012.

"Imports boosted by front-loaded demand before the sales tax rise dropped off in April," Yoshiki Shinke, the chief economist at Dai-ichi Life Research Institute, said before the report.

"We have to wait for exports to recover strongly before we will see a real drop in the trade deficit, and that situation is still way out of sight."

The trade shortfall was wider than a 646.3 billion yen gap forecast in a survey of 29 economists.

Abe increased the sales levy to 8 per cent from 5 per cent in an effort to contain the world's biggest debt burden.

An environmental tax on energy, which also took effect from April 1, undercut imports of oil and coal, Nomura economists said in a report before the data.

Exports were expected to start increasing moderately once overseas economies improved and the effects of temporary factors such as cold US winter weather abated, Bank of Japan governor Haruhiko Kuroda said last week.