Japan posts record trade deficit in H1

26 Jul 2012 – AAP –

Japan has posted a record first-half trade deficit of $US37.3 billion ($A36.59 billion) as energy costs soared and exports to key markets slumped, while analysts warned of further pain for the next six months.

As the country struggles to recover from last year’s quake-tsunami and nuclear crisis, costs have shot up while income has plummeted owing to the rolling debt crisis in Europe and a stuttering recovery in the United States and a strong yen.

The 2.9 trillion yen deficit stemmed largely from energy costs, with the resource-poor nation seeing a nearly 50 per cent jump in purchases of liquefied natural gas and a 16 per cent increase in crude oil shipments, the data showed.

Japan has struggled to meet its energy needs and has turned to pricey fossil fuel alternatives after its nuclear reactors were switched off following the crisis at the Fukushima Daiichi plant caused by the March 11 quake-tsunami.

“Japan’s trade balance continues to show a trend of weak exports and extreme sensitivity to import prices, such as those of crude oil,” RBS Securities chief Japan economist Junko Nishioka said on Wednesday.

“The crisis in Europe is posing a growing risk to Japan’s economic recovery scenario.”

In the first half, Japan’s imports rose 7.4 per cent on-year, while exports grew just 1.5 per cent.

The country’s trade surplus with the European Union during the first half was at a record low, according to the ministry, as vehicles and semiconductor shipments dived.

Europe is a major market for a wide range of Japanese products and Tokyo has repeatedly warned that the continent’s economic woes would directly impact its recovery prospects.

May saw a bigger-than-expected trade deficit of about 907 billion yen, Japan’s first monthly trade deficit with the European Union since records began in 1979.

Adding to the downward pressure on exports is the strengthening yen – which is at a 12-year high against the euro – as investors flock to the safe haven unit owing to uncertainty over the global outlook. Last year it touched a record high against the dollar.

The rise has prompted Tokyo to repeat warnings that the currency was overvalued, with officials in recent days hinting that they may intervene again in foreign exchange markets.

“While exports to Europe and China were already weak, we now see that export (growth) to the US may also be declining,” Hideki Matsumura, economist at Japan Research Institute, told Dow Jones Newswires.

“I believe Japan will post another annual trade deficit. We’re already in the red looking at the last six months, and it’s too late to regain our losses.”

Data for June alone, however, saw Japan post a better-than-expected trade surplus of 61.7 billion yen, instead of the market forecast for a 135 billion yen deficit, the official data showed.

But while it was the first surplus in four months, with the exports of vehicles and auto parts rising, some analysts said even those figures were less than encouraging for the world’s third-largest economy.

Japan predicts 2.2 per cent growth

13 July 2012 – AAP –

The Bank of Japan (BoJ) says it expects the country’s economy to expand by 2.2 per cent in the fiscal year to the end of March 2013 and has held off ushering in fresh stimulus.

Today’s forecast from the BoJ, which kept interest rates and a Y70 trillion ($A858 billion) asset-purchase program unchanged after a two-day policy meeting, was slightly lower than its April outlook of 2.3 per cent growth.

The central bank kept its 1.7 per cent growth forecast for the next fiscal year unchanged, but warned that uncertainty in overseas markets, including Europe and the United States, could be a drag on Japan’s economic recovery.

“Japan’s economic activity has started picking up moderately as domestic demand remains firm, mainly supported by reconstruction-related demand” after last year’s quake-tsunami disaster, it said in a statement.

“(But) there remains a high degree of uncertainty about the global economy, including the prospects for the European debt problem …(and) the momentum toward a recovery for the US economy”.

The bank’s decision not to usher in further stimulus may surprise some dealers who had expected new policy measures after interest rate cuts last week by the European Central Bank and China’s central bank.

Brazil yesterday cut its rate to a record low, while today South Korea’s central bank unexpectedly cut its key interest rate for the first time in more than three years.