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By Daniel Leussink
TOKYO (Reuters) – Japan posted its biggest month-on-month industrial deficit in August as imports rose due to fuel peaks and a falling yen, exposing the economy’s vulnerability to external value pressures.
The industry’s growing deficit highlights the fragile nature of Japan’s economic recovery, which has so far remained largely intact despite the high value corporations pay for imports, compounded by the yen’s 24-year low and customer development for a global slowdown.
Imports rose 49. 9% year-on-year through August, driven by prices of crude oil, coal and liquefied herbal fuel (LNG), and inflated the industry’s deficit to 2,817. 3 trillion yen ($19. 71 billion), the largest deficit on record.
The increase in imports exceeded the average market forecast of a 46. 7% increase in a Reuters vote and exceeded the 22. 1% year-on-year increase in exports in the same month, according to data from the Ministry of Finance.
August’s industry hole marked the thirteenth consecutive month of year-on-year deficits and exceeded the 2. 3982 million yen deficit expected in a Reuters poll.
The yen’s 20% drop over the past six months has worsened import costs.
By region, exports to China, Japan’s largest trading partner, grew by 13. 5% year-on-year thanks to higher shipments of cars, such as hybrids, to the country.
Shipments to the world’s largest economy, the United States, rose 33. 8% in August, driven by higher exports of auto and parts.
According to the data, oil imports from the UAE and coal and LNG from Australia boosted overall imports.
Japan’s economy grew for the third straight quarter in April-June, according to last week’s data, as the lifting of COVID-19-like RESTRICTIONS boosted customer and business spending.
Analysts say, however, that the country’s recovery remains fragile as consumers and business activity face dangers such as a slowdown in global expansion and a tightening of policy across many central banks around the world.
($1 = 142. 9700 yen)
(Reporting through Daniel Leussink; Edited by Christopher Cushing)