Japan logged its 2nd-largest ever trade deficit in May, after imports jumped while exports fell at a faster-than-expected pace
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The drop in exports may cast doubt on expectations of a sharp recovery for the second half of the year.
But Chief Cabinet Secretary Yukio Edano calls the setback temporary, saying:
“We had such extensive damage from the earthquake, so we did expect this to happen temporarily. We will try to get out of this situation as soon as possible.”
Exports fell 10.3% in May, while imports rose 12.3%, putting the country in a $10.7 billion trade deficit, its second deficit in as many months.
Edano sees exports picking up though sooner than later, saying:
“Because of efforts made by each individual companies, the manufacturing process is making a faster than expected recovery. So I expect things to improve in the not-so-distant future”
Still, economists say Japan will remain in a trade deficit in coming months with imports of oil set to grow, to make up for nuclear power losses and for reconstruction efforts.
The fall in exports also lends weight to the argument that the Bank of Japan (BOJ) will have to ease monetary policy further to spur the economy.
The BOJ last week kept monetary policy on hold but expanded a loan scheme targeting growth industries.
Japanese markets did not react to the trade figures, with the Nikkei 225 up after hitting a three-month low last week
Japan trades at the biggest discount among developed markets, with valuations at just 8 times forward earnings, compared with 10.5 times for Asia and nearly 13 times for the U.S. market.
Bottom line: Japan logs its 2nd-largest ever trade deficit in May, after imports jumped while exports fell at a faster-than-expected pace; figures cast some doubt over sharp second-half recovery.