Japan trade gap widens as imports surge, capex solid for now

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TOKYO — Japan’s imports jumped to a record

amount in July, boosted by global fuel inflation and a weak

yen, outweighing exports and deepening the trade deficit, in a

sign of a further worsening in the terms of trade for the

export-oriented economy.

The trade data came on the heels of Reuters Tankan, which

showed improvement in Japan’s business sentiment in August,

while a key gauge of corporate capital spending rebounded in

June from the previous month’s decline.

While the mixed batch of data provides some evidence of

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resilience, policymakers are likely to maintain calls for more

stimulus as the world’s third-largest economy struggles to shake

off the hit from the pandemic and as the global outlook dims.

“Exports are likely to slow down ahead due to global

tightening of monetary policy, which could sap corporate

appetite for investment,” said Takeshi Minami, chief economist

at Norinchukin Research Institute.

“Japan’s export-led economy will be losing momentum towards

later this year and early next amid fears of global downturn.”

Ministry of Finance data showed on Wednesday exports grew

19.0% in July from a year earlier, posting 17 straight months of

gains led by U.S.-bound shipments of cars and China-bound

chip-related shipments, beating expectations for a 18.2% gain.

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Imports rose 47.2% in July year-on-year to a record 10.2

trillion yen ($76.06 billion), driven by costs of crude oil,

coal and liquid natural gas. That beat expectations for a 45.7%

rise and overwhelmed exports, bringing the trade deficit to

1.4368 trillion yen in July.

The yen’s 23.1% fall from a year earlier added to higher

import costs, the data showed.

CAPEX RETURNS BUT RISKS AHEAD

Separate data showed Japan’s new machinery orders, a key

gauge of capital spending, rose 0.9% in June from the previous

month, reversing the previous month’s decline but below the 1.3%

gain expected by economists.

In April-June, core machinery orders grew 8.1% from the

previous quarter, posting the fastest growth since the final

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quarter of 2020. Firms are expecting a 1.8% decline in

July-September core orders, pulling back from the solid growth

seen in the second quarter, a government official told

reporters.

However, there are downside risks such as China’s economic

slowdown and a COVID-19 resurgence, the official added.

Reflecting corporate resilience, the Reuters Tankan

sentiment index for manufacturers rose 4 points to 13 in August

and is seen up further to 15 over next three months.

The service-sector index rose to 19 from 14 in July and was

seen steady in November helped in part by the lifting of

coronavirus curbs among industries such as tourism and eateries.

($1 = 134.1000 yen)

(Reporting by Tetsushi Kajimoto; Editing by Sam Holmes)