Japan trade deficit expands after unexpected drop in exports

TOKYO — Japan’s exports unexpectedly fell in June to swell the trade deficit more than forecast, putting a drag on an economy squeezed by a sales-tax increase in April.

Exports shrank 2 per cent from a year earlier, the Finance Ministry said yesterday, compared with a median forecast of a 1 per cent rise. That followed a 2.7 per cent decline in the previous month, which was the first annual drop in 15 months. Imports rose 8.4 per cent to leave a shortfall of ¥822.2 billion (S$10 billion), surpassing a ¥643 billion projection.

Sluggish exports, a weak spot in the world’s third-largest economy, have been a concern for policymakers who hoped that a recovery in external demand would help offset the pain from a sales tax hike in April.

Analysts say weak exports alone may not prompt the Bank of Japan to expand its massive quantitative and qualitative monetary easing policy, but if domestic demand fails to convincingly recover, it could raise expectations for additional monetary expansion.

Exports to the United States, a key market, fell 2.2 per cent on-year in June as more Japanese companies produce goods in other countries, such as Mexico, for US consumers.

Exports to China, another key market for Japan, rose 1.5 per cent, but exports to Asia, which accounts for more than half of Japan’s total exports, fell 3.8 per cent, hit by sluggish shipments of electronics parts. AGENCIES