World Economy

Shaky Japan Economy Hit Hard Again

Shaky Japan Economy Hit Hard Again Shaky Japan Economy Hit Hard Again

Japan’s shaky economy was dealt another blow on Wednesday, as official data showed a widening September trade deficit that puts the world’s number-three economy on track to log a record annual shortfall.

The worse-than-expected deficit of 958.3 billion yen ($8.96 billion) adds to a string of weak figures and follows a sharp economic contraction in the second quarter after an April sales tax rise slammed the brakes on growth — fuelling fears of a recession, BBC reported.

The latest numbers translated into a trade deficit of 10.47 trillion yen for the first nine months of the year, a 35 percent leap from a year ago.

Earlier this month, the International Monetary Fund nearly halved its 2014 growth projections for Japan — to 0.9 percent from 1.6 percent — underscoring the damage that the tax increase inflicted on the economy.

And on Tuesday the Japanese government downgraded its outlook for the economy for the second month in a row, raising more questions about whether Tokyo will raise the levy again next year to 10 percent from 8 percent.


However, improving shipments to Asia — which rose 8.1 percent in September — could help smooth out Japan’s trade picture, according to SMBC Nikko Securities.

“Asian production has been slack since 2011 and was part of the reason that Japanese exports stalled,” it said in a research report.

“But it is increasing gradually now and may lead to a recovery in Japanese exports.”

The currency’s drop has not translated into a strong pick-up in exports as Japanese companies shift production to lower-cost venues abroad.

Japan’s September trade deficit of 958.3 billion yen was a record for the month, up from 943.2 billion yen a year earlier, and was much worse than a market median forecast of a 768-billion-yen deficit. The shortfall was up 1.6 percent year-on-year.

The finance ministry said exports rose 6.9 percent to 6.38 trillion yen helped by higher shipments of cars, steel and ships.

Shipments to China rose 8.8 percent, while exports to North America rose 4.7 percent and were nearly flat to the European Union, inching up 0.7 percent.


Imports climbed 6.2 percent to 7.34 trillion yen, boosted largely by purchases of liquefied natural gas and telecommunications equipment, which was partly tied to the launch of the newest iPhone in Japan last month.

Natural gas buying has remained high as Japan tried to plug a yawning energy gap after the 2011 Fukushima crisis forced the shutdown of nuclear reactors, which once supplied more than one-quarter of the nation’s power.

Japan’s economy contracted 1.8 percent on-quarter in the three months to June — or 7.1 percent on an annualized basis — its steepest quarterly drop since the quake-tsunami disaster, raising concerns about another downturn in the July-September period.