As China’s economy struggles to retain pace, the expanding trade imbalance underlines the world’s third-largest economy’s susceptibility to rising commodity costs and weakening demand from its big neighbour.
Imports increased 39.6% year on year in January, reaching a new high in terms of yen value of 8.5231 trillion yen ($73.81 billion), according to Ministry of Finance figures released on Thursday, above market expectations of a 37.1 percent growth.
This outstripped a 9.6% increase in exports in the year to January, resulting in a trade imbalance of 2.1911 trillion yen, the most in a single month since January 2014.
The deficit exceeded the median forecast of a 1.607 trillion yen deficit.
“Exports tend to fall in January due to seasonal reasons, such as lower factory operating rates due to the New Year vacations,” said Takumi Tsunoda, senior analyst at Shinkin Central Bank Research Institute.
“It’s simple for the trade balance to become negative in a month, but even when that’s taken into account, the deficit remains substantial.”
According to Tsunoda, a drop in vehicle exports, which went into contraction from expansion the previous month, was a major contributor to the deficit.
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Increasing inbound cargoes of gasoline, coal, and liquefied natural gas pushed up imports.
EXPORTS TO CHINA FALL
Exports to China, Japan’s largest commercial partner, fell 5.4 percent in the 12 months to January, the first drop in 19 months, while imports increased 23.7 percent, the greatest increase in four months.
Slower exports and a front-loading of demand ahead of China’s week-long Lunar New Year vacation, which began on the final day of January, were likely factors.
The slowing pace of China’s vast economy, which is confronting decreasing consumption and a housing slowdown, was a major source of concern, according to several analysts.
According to Ryosuke Katagi, market economist at Mizuho Securities, “China’s economic downturn might affect exports in the future.”
In January, shipments to the United States, another important market for Japanese goods, increased by 11.5 percent, as higher machinery shipments offset a drop in automobile exports.
Separate government statistics indicated that core machinery orders, which are a leading indicator of capital investment in the next six to nine months, increased 3.6 percent in December compared to the previous month, beating expectations of a 1.8 percent drop.
After a 6.5 percent increase in the previous quarter, manufacturers predicted core orders to fall 1.1 percent in January-March.
According to official data released on Tuesday, Japan’s economy increased slightly less than projected in the fourth quarter of 2021, with dropping coronavirus cases helping to buoy up consumption, however a record spike in Omicron variant infections and high raw material costs are clouding the picture.