Japan’s trade gap widens in April

Surging global commodity costs inflate country’s import bill to record

TOKYO:

Japan’s exports extended double-digit gains for a third straight month in April, but surging global commodity costs inflated the country’s import bill to a record, adding to worries about the rising cost of living.

Shoring up the prospects of a private demand-led recovery, however, was a gauge of capital expenditure that posted its first monthly gain in three months.

The mixed data on Thursday followed the yen’s falls to two-decade lows against the dollar earlier this month, which stoked fears of worsening terms of trade and added financial burdens for the resource-poor Japanese economy as import costs soar.

A weak yen, once considered a boon for the export-led economy, now has less of an impact as shipments grow smaller due to the ongoing shift by Japanese manufacturers to offshore production.

Japan’s exports rose 12.5% in April from a year earlier, the Ministry of Finance data showed, led by US-bound shipments of cars, slightly missing a 13.8% increase expected by economists in a Reuters’ poll. It followed a 14.7% rise in March.

In a worrying sign for the outlook, China-bound shipments fell 5.9% in April, the biggest drop since March 2020, as heavy Covid-19 curbs in major cities like Shanghai disrupted supply chains and paralysed economic activity.

Imports from China – Japan’s largest trading partner – also fell the most since September 2020, the data showed.

“Import gains caused by rising crude oil prices and a weak yen mean a transfer of national wealth to oil-producing nations, depriving Japan of purchasing power,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“As such, Japan’s economic recovery depends on coronavirus developments at home and China as the lockdown in Shanghai has disrupted supply-side and consumer activity.”

Published in The Express Tribune, May 20^th, 2022.

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