TOKYO: Japan’s trade deficit narrowed sharply in October, data showed on Thursday, as a weaker yen boosted exports while lower oil prices brought down the country’s massive energy bill.
The figures marked a bright spot among otherwise gloomy data lately, including gross domestic product (GDP) figures earlier this week that showed the world’s number-three economy had slipped into recession.
Japanese exports jumped nearly 10 percent last month, as higher shipments of cars, ships and steel helped the trade balance, while imports ticked up 2.7 percent.
That translated into a monthly trade deficit of 709.9 billion yen ($6.0 billion), or nearly 36 percent lower than a year-before shortfall of 1,100.4 billion yen, the finance ministry said.
The value of shipments to China rose 7.2 percent, while exports to North America climbed 8.5 percent and those to the European Union were up 5.4 percent.
Energy costs have weighed heavily on Japan as the resource-poor country struggles to plug its energy gap after the 2011 Fukushima crisis forced the shutdown of nuclear reactors that once supplied more than a quarter of its power.
That problem has been exacerbated by the yen’s sharp fall—it is currently at a seven-year low against the dollar—which hiked the cost of imports purchased in foreign currencies.
But October oil imports were down 10.8 percent, partly reflecting lower prices on the world market.
The country’s trade balance was likely to narrow further as commodity prices moderate while the US Federal Reserve winds up its quantitative easing plan and eyes an interest rate hike next year, said Junichi Makino, chief economist at SMBC Nikko Securities.
“The Federal Reserve is about to tighten its credit grip, sending commodities prices tumbling,” he said in a note.
“This is a reversal of what had happed before. The normalization of the Federal Reserve’s monetary policy is expected to normalize Japan’s trade balance.”
On Wednesday, the Bank of Japan upgraded its view on exports as it held off further expanding its huge stimulus program.
However, the picture for exports remains cloudy amid tepid growth in the eurozone and a slowdown in China, a key trading partner for Japan.