Econintersect: The devalued yen was supposed to make Japan’s exports grow sufficiently to more than offset increased cost of imports. The trade deficit was supposed to decrease. Something has happened to the trade deficit reduction formula because the negative balance keeps rising, even when exports increase, as they did in September. Exports increased 6.9% in September year-over-year, while imports grew by only 6.2%. But when the imports level of a year ago is sufficiently larger than exports, the smaller percentage can still represent a larger currency amount. That is what happened in September as the trade deficit grew by 1.6% to ¥958.3 billion ($8.96 billion) from a year earlier. (See note end of article.)
Although this was the first increase in the trade deficit in three months, the following graph from Trading Economics shows that the variation from month to month for the second and third quarters has been hardly distinguishable from noise. And if any trend were to be ascribed for the last six months it would be a slightly downward sloping trend (increasing deficit).
Japan has a long history of trade surpluses which ended with the March 2011 megaquake and tsunami which resulted in all Japan’s nuclear power plants being shut down and a significant increase in imports of foreign fossil fuels.
- Imports for Sep 2013 were 6,914,199; for Sep 2014: 7,341,492. Change = 427,293 (6.2%)
- Exports for Sep 2013 were 5,970,950; for Sep 2014: 6,383,162. Change = 412,212 (6.9%)
Thus the trade deficit increased even though exports increased by a higher percentage than did imports. All values are in millions of YEN.
Trade Statistics of Japan (Ministry of Finance)
Japan’s Trade Deficit Edges Up (Mitsuru Obe, The Wall Street Journal, 21 October 2014)
Japan Balance of Trade (Trading Economics, 22 October 2014)