Japan logs 695.3 bil. yen trade deficit in Aug. on weak yen

TOKYO (Kyodo) — Japan posted a 695.29 billion yen ($4.9 billion) trade deficit in August as a weak yen inflated the value of imports, even though exports expanded to a record for the month, government data showed Wednesday.

Helped by pharmaceutical and oil products, imports increased 2.3 percent from a year earlier to 9.14 trillion yen, rising for the fifth consecutive month and marking the second-largest for August.

Exports also rose 5.6 percent to 8.44 trillion yen, up for the ninth straight month, according to a preliminary report by the Finance Ministry.

Japan’s trade balance remained in the red for the second consecutive month, but the deficit shrank 26 percent from a year ago supported by exports of chipmaking devices as well as semiconductors and other electronics components.

The yen was 6.1 percent weaker against the U.S. dollar in August, compared with the same month last year. A weak yen inflates import costs for resource-scarce Japan, but also boosts Japanese exporters’ overseas profits when repatriated.

The Japanese currency strengthened sharply against the dollar in August after Bank of Japan chief Kazuo Ueda said the previous month that interest rates could be raised further.

Ryotaro Tsuchiya, an economist at Mizuho Securities Co., said the yen’s appreciation would reduce Japan’s trade deficit in the short term, while export volumes have been declining due to sluggish demand overseas.

But Tsuchiya said that “a further reduction in the trade deficit is unlikely unless the global production cycle returns to normal.”

Japan had a 657.52 billion yen trade surplus with the United States, a key trading partner, up 1.2 percent.

Exports fell 0.7 percent to 1.61 trillion yen, down for the first time in 35 months due to weak auto shipments. Imports also declined 2.0 percent to 949.11 billion yen, down for the first time in eight months.

With China, another major partner, Japan ran a deficit of 377.15 billion yen, down 23.8 percent, remaining in the red for the 41st consecutive month.

China-bound exports gained 5.2 percent to 1.51 trillion yen, up for the ninth straight month, while imports lost 2.3 percent to 1.89 trillion yen, the first decline in five months.

Japan eked out a surplus of 441.92 billion yen, with Asia, including China, remaining in the black for the seventh consecutive month.

Its trade deficit with the European Union nearly tripled to 353.59 billion yen, with shipments of pharmaceutical products from Belgium and airplanes from France lifting imports.