Japan’s trade deficit widens on drop in car exports, oil imports

Bloomberg

Japan posted a bigger-than-forecast trade deficit in January as auto exports declined and energy import costs increased. Economists cautioned against reading the single month’s figures negatively, noting that global demand should support Japan exports this year.
Exports rose 1.3 percent from a year earlier (versus +5 percent estimate). Imports climbed for the first time in two years, by 8.5 percent (versus +4.8 percent estimate). Trade deficit for January was 1.1 trillion yen ($9.6 billion), compared with expectations for a deficit of about 625.9 billion yen.
After snapping a sustained slump in December, any strength in exports is
a welcome boost to Prime Minister Shinzo Abe’s efforts to spur economic growth, and a buttress to corporate profits ahead of the annual spring wage negotiations. Higher commodity prices stemming from OPEC’s decision to cut production last year increase Japan’s import bill, but should help the central bank in its campaign to spur inflation.
A 6.6 percent drop in exports to the US reflected a slide in car sales that underscores the preference of many American consumers for SUVs relative to Japanese sedans, according to the government in Tokyo. This may assist Finance Minister Taro Aso when he gets into bilateral talks on trade and the economy in April with Vice President Mike Pence. The threat of US protectionism remains a large risk for Japan, even after the warm welcome Abe received from President Donald Trump earlier this month.
The slowdown in exports seen in January is just temporary and there’s no change to the view that Japan’s economy is driven by external demand while domestic forces remain weak, according to Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo.