Japan announced data regarding its third straight month trade deficit in September. On Monday, Tokyo issued a report pertaining to its trade deficit, marking the third straight month continual trade deficit and the tenth straight month continuous deficit.
The weakening-exports-induced deficit came in at JPY 122.98 billion, lower than August’s JPY 143.53 billion deficit. That said, the continual deficit still might force the Bank of Japan to ease monetary policy.
“Though overall conditions are currently stable, it would become a factor for monetary easing if it did affect Japan’s economy as a whole,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance.
The world’s third-largest economy is not indicating a good performance amid the global economic slowdown. Accordingly, the trade figure is arguably worse than last year’s as export and import rates dropped.
The report from the Ministry of Finance disclosed that the country’s export was down 5.2% in September. Additionally, this export decline is robustly affected by the decrease of autos and its parts, and chip exports to neighboring Asia countries.
Meanwhile, the import of Japan was also down 1.4% in this year’s September. For instance, one of the factors causing the deficit is the decreasing crude oil purchases from Saudi Arabia.
To combat the matter, the central bank, Bank of Japan, might have to ease monetary policy, including dealing with its 10% tax hike. Also, Tokyo formed deals with its trading partners to boost trades in several sectors, among others is the US.
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The Cause of Japan Trade Deficit
The cause of the Japan trade deficit vary. However, the main cause of the decline is the decreasing export and import rates and volumes, especially to neighboring Asian countries.
Japan’s exports to Asia, the biggest contributor to the country’s export, were down 7.8%. One of the major causes is the 18.7% decline in semiconductor manufacturing parts, specifically to South Korea due to the trade dispute.
Meanwhile, the export to the US also fell by 7.9% in the same report. Accordingly, the declining number of autos, aircraft motors, and their parts initiated the deficit.
Japan’s export to its biggest trading partner, China, is also in jeopardy. The ministry’s report divulged a 6.7% deficit as a consequence of declining exports of auto parts and semiconductor manufacturing equipment.
Also, the country’s overall import rates fell 1.5% which actually was lower than the expected 2.3%. In contrast, the import volumes rose in which analysts predict that it is to avoid the upcoming 10% tax hike.
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