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Japan posts much wider than expected trade gap as Chinese exports slow and energy imports soar

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TOKYO – Japan posted a trade deficit more than four times larger than market forecasts in March, as exports to China slowed sharply while soaring energy prices raised the cost of imports, adding to the economic challenges posed by the conflict in Ukraine.

Outbound trade was dampened by a decline in car exports and slowing growth in shipments to Japan’s biggest trading partner, China, data showed, indicating lingering risk from global supply constraints and the coronavirus pandemic.

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The persistent trade deficit highlights the vulnerability of the world’s third-largest economy to soaring import costs.

“The Japanese economy could experience a slower recovery if exports to China are slow,” said Takeshi Minami, chief economist at the Norinchukin Research Institute. Exports to China account for more than a fifth of Japan’s total shipments by value, he said.

Imports soared 31.2% on the year to March, Finance Ministry data showed on Wednesday, above a median forecast of 28.9% in a Reuters poll of economists.

That topped a 14.7% increase in exports, resulting in a trade deficit of 412.4 billion yen ($3.19 billion) – eclipsing the 100.8 billion yen estimated in the survey.

March marked the eighth consecutive deficit, although it was the smallest in five months.

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By region, exports to China rose just 2.9% in the 12 months to March, helped in part by higher shipments of AV projectors. This was much lower than the 25.8% the previous month.

“China’s zero-coronavirus policies and city lockdowns have led to a contraction in production activity, hurting Japanese exports of parts and capital goods,” Norinchukin’s Minami said.

Exports to the United States, the world’s largest economy, rose 23.8% on higher shipments of motor vehicle parts and power generation machinery.

Overall, however, exports were held back by a 0.7% drop in motor vehicle shipments.

Imports were mainly boosted by larger shipments of oil from the United Arab Emirates as well as coal and liquefied natural gas from Australia, the data showed.

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“Net trade is expected to have shaved around 0.5 percentage points off GDP (gross domestic product) growth in the last quarter, as import volumes grew much faster than export volumes,” Tom said. Learmouth, Japanese economist at Capital Economics.

“But driven by Japanese staples of cars and capital goods, we believe exports will soon start to outpace imports.”

Japan’s economy is expected to grow 4.9% annualized in the current quarter on the back of a pickup in consumer activity after the government ended coronavirus pandemic measures last month, a separate Reuters poll of economists showed.

But the rapid weakening of the yen, which has slipped to its lowest level in two decades against the US dollar on the prospect of widening interest rate differentials between the United States and Japan, is inflating the costs. growing fuel and food imports, putting pressure on household purchasing power. ($1 = 129.1800 yen) (Reporting by Daniel Leussink; Editing by Christopher Cushing)



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