Japan Trade Deficit Reaches New Record

Japan’s monthly trade deficit has more than doubled to a new record after a weakened currency drove up the cost of fuel imports while exports slowed.

Japan’s trade gap rose by 71% to 2.79tn yen ($27.3bn; £16.4bn) in January from a deficit of 1.3tn yen in December.

This comes after imports rose by 25%, outweighing a 9.5% rise in exports.

Japan has posted large trade deficits for 19 straight months, raising concerns the government’s stimulus policy may be having a counter effect.

Prime Minister Shinzo Abe has been looking to weaken the value of Japan’s currency to stimulate economic growth and end nearly two decades of deflation.

His measures – which have come to be known as “Abenomics” – include increasing the money supply in the country to drive down the value of the currency.

Theoretically, a weak yen should boost exports by making them cheaper for foreign buyers, and increase the profits of exporters when they repatriate overseas earnings.

The Japanese yen has lost nearly 20% of its value against the US dollar over the past year, but the weak currency has also made imports more expensive and affected the country’s trade balance.

The world’s third-largest economy has had to import most of its energy needs after it shut all of its nuclear reactors in the aftermath of the tsunami and earthquake in 2011.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza