Japan's trade deficit narrows as lower oil prices reduce import costs, export volume weakens

TOKYO – Japan’s trade deficit narrowed in February, thanks to a plunge in import costs due to lower crude oil prices. It was the 32nd straight month of deficits.

The Finance Ministry said Wednesday that the trade deficit fell 47 per cent from a year earlier to 424.6 billion yen ($3.5 billion) last month, compared with a gap of 1.18 trillion yen in January. The gap was smaller than expected, but belied a weakening in export volumes.

Japan’s trade deficit usually narrows in February. Adjusted for seasonal factors, it actually expanded, while exports fell from the month before with a sharp drop in export volumes, Marcel Thieliant of Capital Economics said in a commentary.

“Net trade should therefore become a drag on GDP growth soon,” he said.

In yen terms, vehicle and machinery exports rose, while imports from the Middle East, mostly of oil and gas, fell 43 per cent.

Japan’s exports to the U.S. jumped 14 per cent from a year earlier to 1.2 trillion yen (about $10 billion), but shipments to China fell more than 17 per cent as the economy there slowed.

Japan became a net importer as its import bill for oil and gas soared after its nuclear power plants were idled following the disaster at the Fukushima Dai-Ichi plant in March 2011. A shift of manufacturers overseas has also reduced export volumes, though the recovery of the U.S. economy has helped boost shipments to North America in recent months.