Japan logged a surprise deficit of ¥203bn ($1.8bn), the first red ink in four months, according to data from the finance ministry, despite market expectations for a surplus.
“Crude oil prices rebounded while the yen was weaker in the month,” Yuichiro Nagai, economist at Barclays Capital, told AFP.
The yen was 2.3% weaker against the dollar compared with its year-before level, which helped push up imports costs.
The deficit came as a surprise after recent data showed Japan’s economy was picking up steam with exports growing on the back of a global economic recovery.
Nagai said there was no need to be overly pessimistic over figures for a single month.
May data showed “a correction in speed” but the Japanese economy is likely to continue to expand in the July-September quarter even if it stalls in April-June, he said.
Takeshi Minami, chief Japan economist at Norinchukin Research Institute, said exports were solid.
“Today’s report confirms that the shipments will continue to drive Japan’s economy in coming months, feeding gradually to capital spending and household spending,” he told Bloomberg News.
The May deficit is “mainly because of a rise in imports, reflecting Japan’s resilient economy”, Minami said.
Overall exports in May rose 14.9% from a year earlier to ¥5.85tn thanks to an increase in shipments of cars and steel, chalking up growth for the sixth consecutive month. But imports expanded faster, rising 17.8% to ¥6.05tn, boosted by heavier costs for liquefied natural gas, coal and crude oil.
Japan’s dependence on fossil fuel has risen since the nation shifted to thermal power generation with most of the nation’s nuclear reactors remaining offline after the 2011 Fukushima earthquake/tsunami disaster. Japan’s politically sensitive surplus with the United States rose 19% to ¥411bn as exports increased 11.6%.
US President Donald Trump has vowed to root out “unfair” trade practices around the world and target other countries including Japan.
The trade deficit with China shrank 22.4% to ¥311.8bn as exports grew 23.9%.
