Japan's trade deficit sinks 58 per cent on lower oil prices

TOKYO - Japan's trade deficit plunged nearly 60 per cent in January from a year before as exports rose and its import bill for oil and gas dropped thanks to sharply lower crude oil prices.

The deficit of 1.18 trillion yen ($9.9 billion) was better than some forecasts. Exports surged a stronger-than-expected 17 per cent from the year before to 6.1 trillion yen ($51.7 billion), powered by strong shipments of vehicles and machinery. Imports fell 9 per cent to 7.32 trillion yen ($61.6 billion), with a nearly 25 per cent drop in imports of oil and gas.

Costs for imports of other commodities have also fallen, both due to lower demand and slumping prices.

The deficit was nearly 2.8 trillion yen in January 2014.

Japan's long era of trade surpluses ended after its nuclear plants were shut down following the disaster at the Fukushima Dai-Ichi nuclear power plant in 2011 and imports of oil and gas jumped to make up for lost generating capacity. January was the 31st straight month of deficits.

Strong monetary stimulus aimed at spurring inflation has caused the Japanese yen to fall, as the U.S. dollar has gained strength. But until recently the weaker yen had increased production costs but done little to boost exports by Japanese manufacturers, who have shifted a large share of their production overseas. Stronger growth in the U.S. and other major markets appears to have been a larger factor in the export recovery.

Japan logged double-digit increases in exports of machinery, electronics and vehicles in January. That contributed to improved manufacturing output, which helped the economy hobble out of recession late last year, with a 2.2 per cent annualized rate of expansion in October-December.

But economic growth for the year was flat after a sales tax hike in April sapped demand, and overall net exports continued to drag on growth.

Still, a stronger U.S. economy has helped.

Japan's exports to the U.S. rose 16.5 per cent in January while imports fell 1.4 per cent, leaving a trade surplus of 545.4 billion yen ($4.6 billion). But exports to China, whose economy has been slowing, jumped nearly 21 per cent from a year earlier, as imports fell almost 7 per cent, leaving a trade deficit of 736.4 billion yen ($6.2 billion), down almost 30 per cent.

Meanwhile, a strategy of balancing Japan's trade and investment in China with closer economic ties to the rest of the region is paying off as exports to other East Asian countries and Southeast Asia surge.