Japan trade deficit drops to lowest in 4 years

TOKYO – Japan’s trade deficit fell to its lowest level in four years in 2015, the Finance Ministry reported Monday, as import costs dropped thanks to the collapse in oil prices.

Preliminary figures show exports rose 3.5 percent in 2015 from the year before, while imports dropped 8.7 percent. The deficit compared with a record ¥12.8 trillion shortfall in 2014.

Japan slipped into deficits after the 2011 nuclear accident in Fukushima led to closures of reactors, pushing up imports of oil and gas.

Japan’s trade balance swung to a surplus in December, as oil prices tumbled and the yen gained against other currencies.

The December trade surplus of ¥140.2 billion ($1.2 billion) compared with a deficit of ¥379.7 billion in November and a deficit of ¥665.6 billion in December 2014.

However, exports have been weakening over the past year, as China’s economy has slowed. After rising 7.9 percent in January-June over the same period the year before, exports rose a scant 0.6 percent in July-December.

Exports to China fell 1.1 percent in 2015, to ¥13.2 trillion ($95.8 billion), while exports to the US jumped 11.5 percent to ¥15.2 trillion ($128.6 billion), making the US Japan’s largest export market.

Japan’s imports of crude oil, gas and other fuels plunged 43 percent in December to ¥1.4 trillion ($11.8 billion). In 2015, they fell 34 percent, to ¥18.2 trillion ($154 billion).

Weaker than expected demand in China, which is spilling into other Asian markets, has hamstrung growth in Japan. Meanwhile, the prolonged bout of low crude oil prices – normally a boon for a resource-scarce country like Japan which imports almost all of its oil and gas –  is hindering progress toward a two percent inflation goal meant to mark the end of a long spell of growth-dampening deflation.

“The contraction in the trade deficit will likely continue, as further declines in oil prices have kept the value of imports declining in the double digits,” Merrill Lynch said in a commentary. But it added that, “With export momentum still weak, industrial production should continue to flat-line.”

Analysts said the data raise pressure on Japan’s central bank to further ease its already ultra-loose monetary policy, partly to counter recent pressures toward appreciation of the yen, which gained value against the US dollar during the recent bout of gyrations in global financial markets.