Japan: Trade balance incurs largest deficit in more than two years
June 20, 2011
In May, Japan recorded its largest trade deficit since January 2009, confirming the country faces an arduous recovery process. Exports tumbled 10.3% over the same month the previous year (April: -12.5% year-on-year), which came in below market expectations of an 8.4% decline. On the other hand, imports remained strong climbing 12.3% (April: +8.9% yoy), which was slightly above the 11.6% rise anticipated by the markets. As a result, the trade balance registered a negative reading of JPY 854 billion (USD 10.5 billion), which represents the second largest trade deficit since records began in 1979. Motor vehicle exports, which account for around 10% of total shipments, led the contraction by falling 28.9% over the same month last year, following on the massive 67.0% decline tallied in April. A monthly analysis corroborates a more subdued contraction than seen in annual figures, with exports expanding a seasonally adjusted 2.5% over the previous month, which followed on a revised 5.5% drop tallied in April. Meanwhile, imports added 2.4% over the previous month (April: +3.6% month-on-month). In addition, the moving 3-month sum in exports started to show the extent of the triple March disasters and declined from JPY 16.6 trillion in April to JPY 15.8 trillion in May, which represents the lowest reading in 15 months. Analysts consider that exports have bottomed out and production should begin to recover. Hence, the trade deficit is likely to improve in the months ahead.