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Shrinking Exports Drive Japan to Trade Deficit

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Japan said that it experienced a trade deficit that was wider than expected, after demand from Europe and China both fell. It is the ninth trade deficit for Japan in 12 months.

Bloomberg reported Wednesday that the numbers came in at a shortfall of 517.4 billion yen ($6.5 billion), after analysts had said in a survey that they expected a deficit of a little more than half that much, at 270 billion yen. Lessened demand in Europe, still battling its financial crisis, and in China led to reduced shipments and higher oil prices boosted import figures.

The news could lead to a call for more stimulus, as Japan still works on its recovery from the triple disaster of earthquake, tsunami and nuclear woes in 2011. The nuclear disaster boosted the country’s imports of alternative fuels, including oil, adding to the imbalance.

Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo, voiced that view in the report, saying, “Japan needs more monetary stimulus to sustain the recovery. Sentiment among manufacturers is deteriorating globally, triggered by Europe’s fiscal problems, and that’s adversely affecting Asian economies.”

Shipment of wares to the European Union (EU) fell by the most since October 2009, down 25% in July from 2011. Shipments to China also fell substantially, lower in July by 12% from a month earlier. According to the Finance Ministry in Tokyo, the July trade deficit was the worst for that month in any year since 1979.

Asia in general is suffering from economic slowdown, with China’s shipments abroad dropping drastically in July and its own economy recording the slowest growth since Q2 of 2009.

“Today’s report indicated the downside risks to exports have grown,” said Mitsumaru Kumagai in the report. Kumagai, chief economist at Daiwa Institute of Research in Tokyo, was quoted saying, “The economy in the European Union area is stalling and the emerging economies such as China are slowing, so the uncertainty over the global economy is heightening.”

A supplementary government budget is “already a done deal,” according to Hiroshi Watanabe, a senior economist at SMBC Nikko Securities in Tokyo, who voiced that opinion on Aug. 13. The next policy action by the country’s central bank is not to be decided until Sept. 19.

“It’s unavoidable that Japan’s economic growth will lose steam this quarter,” said Kohei Okazaki in the report. Okazaki, an economist at Nomura Securities Co. in Tokyo, added, “Global demand is looking stagnant as China’s economy is slowing while the advanced nations’ economies remain weak.”


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