TOKYO, Japan (AFP) — Japan swung back to a trade deficit in January as exports to China plunged, official data showed Thursday, underscoring the impact of a slowdown in one of Tokyo’s biggest trade partners.
The disappointing figures come after Japan’s economy shrank 0.4 percent in the October-December quarter — or an annualised 1.4 percent drop — owing to weak demand for big-ticket items like cars and home appliances.
That was Japan’s second quarterly contraction in 2015, and dealt another blow to Prime Minister Shinzo Abe’s bid to slay deflation and kick-start the world’s number three economy.
The monthly deficit came in at 646 billion yen ($5.7 billion), reversing a 140 billion yen surplus in December, figures released Thursday showed.
Overall exports slid almost 13 percent from a year ago, while shipments to China dived 17.5 percent, as the powerhouse economy wobbles. Despite diplomatic tensions, China is a key trading partner for Japan.
Exports to other major markets also fell, with a 5.3 percent decline in US shipments and 3.6 percent fall for EU-bound exports.
Imports, meanwhile, dropped 18.0 percent as the cost of oil and gas fell.
Japan’s weak trade figures are likely to fan speculation that the Bank of Japan will launch fresh easing measures.
Last month, policymakers shocked markets with an unprecedented negative interest rate policy, which aims to boost lending by penalising banks for storing excess reserves in the BoJ’s vaults.
As his growth programme limps along and the BoJ struggles to hit an ambitious two-percent inflation target, Abe must decide whether to follow through with another sales tax hike next year.
The hike is seen as crucial to containing Japan’s massive national debt but it could dent consumer spending and hurt an already fragile economy.
A consumption tax hike in 2014 pushed Japan into a brief recession.
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