Japan trade deficit expands after exports unexpectedly drop…

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

Exports shrank 2 percent from a year earlier, the finance ministry said in Tokyotoday, compared with a median forecast of a 1 percent rise in a Bloomberg News survey of 29 economists. Imports rose 8.4 percent to leave a shortfall of 822.2 billion yen ($8.1 billion), surpassing a 643 billion yen projection.

Exports fell 1.7 percent by volume, showing the yen’s 16 percent drop against the dollar since Prime Minister Shinzo Abe came to power in December 2012 has failed to boost outward shipments. They remain 23 percent lower by value than a peak in March 2008, in contrast to the U.S. where they grew 25 percent over the same period.

“Export recovery will be sluggish mainly due to structural reasons” as Japanese companies are producing products abroad for foreign demand, Kiichi Murashima, chief economist at Citigroup Inc. in Tokyo, said after the data. “The trade deficit will remain at the current level through the end of this year with both exports and imports growing slightly.”

The benchmark Topix (TPX) index was up 0.3 percent at 10:48 a.m. in Tokyo, and the yen was 0.1 percent weaker, trading at 101.57 against the dollar.

Swelling Imports

Imports in the first six months of 2014 were the most in any half-year in comparable data back to 1979. With fossil-fuel imports swelling the trade deficit to the most in any such period, a pickup in exports is needed to sustain growth in the world’s third-largest economy.

Bank of Japan Deputy Governor Hiroshi Nakaso said yesterday that the sluggishness in exports is due to slow growth in overseas economies.

Exports to the U.S. fell 2.2 percent from a year earlier, with automobiles shipments dropping 6.8 percent. Exports to Asia were down 3.8 percent.

The government this week cut its growth forecast for the year ending March 2015 to 1.2 percent from a previous projection of 1.4 percent, citing weak foreign demand and a fall in consumption after the tax rise. Source: Bloomberg