Record Japan trade deficit highlights risk of economic stumble

Japan suffered a record trade deficit in January as growth in exports spurred by a weak yen was far outstripped by a surge in import costs, raising fresh doubts about prime minister Shinzo Abe's strategy to spark an economic revival.

The trade numbers came on the heels of a survey showing manufacturers’ sentiment worsened in February in a sign that businesses were bracing for a chill in demand after a planned sales tax increase takes effect in April.

The drumbeat of disappointing data threatens to slam the brakes on the world’s third-largest economy barely a year after Mr Abe set about recharging growth with a potent mix of fiscal and monetary stimulus.

Exports rose 9.5 per cent in January, Ministry of Finance data showed, though growth slowed for the third straight month with the effect of the softer yen on shipments outweighed by a substantial rise in import costs.

The trade balance came to a deficit of 2.79 trillion yen ($27.30 billion) in January -- a record 19th straight month of shortfalls -- as imports rose 25 per cent to a record amount.

The data showed export volumes fell 0.2 per cent in January from a year before.

Reuters