TOKYO – Japan’s trade deficit surged to a record 7.6 trillion yen ($74.9 billion) in the first half of the year as exports failed to keep pace with surging imports, the Finance Ministry reported Thursday.
Japan’s bulging import bill was partly due to a jump in demand as businesses and consumers stepped up purchases ahead of an April 1 increase in the sales tax to 8 per cent from 5 per cent.
Imports for the six months jumped 10 per cent to 42.6 trillion yen ($420 billion) while exports rose 3.2 per cent to 35.1 trillion yen ($346 billion), the preliminary data show.
Imports from China including industrial machinery, consumer products and food jumped 14 per cent, leaving Japan with a 2.92 trillion deficit with China for the first half.
Japan maintained a surplus with the U.S. in the first half of the year, at 2.8 trillion yen ($27.6 billion), as exports rose 4 per cent while imports climbed 12 per cent.
The deficit in June alone more than tripled from the year before to a higher-than-expected 822.2 billion yen ($8.1 billion). Imports surged 8.4 per cent year-on-year to 6.76 trillion yen ($66.6 billion), while exports fell 2 per cent to 5.94 trillion yen ($58.5 billion), the ministry said.
“While the trade deficit widened last month, it remains much smaller than before the sales tax hike. This suggests that net trade finally ceased to be a drag on GDP growth last quarter,” Capital Economics analyst Marcel Thieliant said in a commentary.
The trade deficit was 911 billion yen in May.
Higher imports of fuel and gas have pushed Japan’s trade balance into the red following the halting of all its nuclear reactors for safety checks after the 2011 disaster at the Fukushima Dai-Ichi nuclear plant. In January-June, imports of liquefied natural gas rose 12 per cent while oil imports jumped 5 per cent.
But overall, Japan’s economy is less and less export-driven thanks to the shift overseas of much of its manufacturing in search of lower costs and faster growing markets.
Exports have not received much impetus from the weakening of the yen in 2012-2013. Japan remains heavily dependent on its vehicle exports, which rose 60 per cent from the year before in the first half of 2014.