Japan’s growth in annual exports fell in March owing to weaker deliveries to China, causing investors to speculate that rising external demand may not help the local economy weather the effects of the April 1 hike in sales tax.
Data compiled by the Ministry of Finance indicated that exports grew 1.8 percent last month from a year ago, after surging 9.8 percent on a year-on-year basis last month. This lagged the median estimate of a 6.3 percent advance in a Reuters survey of economists.
The country’s trade deficit widened to a record 13.75 trillion yen ($134.45 billion) in the year ended in March due to the weaker exports.
After earlier advancing faster than most of its peers, Japanese economy has gradually slowed down as the boost provided by the central bank’s stimulus package waned. However, expectations are high that the Bank of Japan will roll out another fresh stimulus this summer following recent economic figures that point to a weakening economy.
Nonetheless, the central bank has insisted there are no such plans, saying that the economy will still meet its target inflation rate of 2 percent, though the onus is on the government to try to bolster private investment.
“Exports are weak because Japanese products are not as competitive as they used to be,” Yasuo Yamamoto, a senior economist at Mizuho Research Institute, told Reuters. “This suggests the economy will struggle to recover after the sales tax hike. The government needs to do more with its growth strategy to make companies more competitive.”
Japan’s exports to China grew 4.3 percent year-on-year in March, down from a growth of 27.6 percent the previous month. Japan has struggled to increase its exports amidst a weak yen which makes imports more expensive compared to exports.
Japan’s trade deficit stood at a shortfall (deficit) of 1.446 trillion yen last month, which is still less than the January’s record trade deficit of 2.79 trillion yen. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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