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Japan’s trade deficit grows
July 24, 2013, 5:26 am

Abe has supported the yen's fall as a means to reinvigorate the economy [Xinhua]

Abe has supported the yen’s fall as a means to reinvigorate the economy [Xinhua]

Japanese Prime Minister Shinzo Abe urged his government to focus energies on economic recovery as new figures from the Ministry of Finance showed that the country had registered a record-setting trade deficit in the first half of the year.

During the January-June period, imports grew by 9. 2 per cent on year to 38,801.2 billion yen ($389.147 billion) while exports rose 4.2 per cent to 33,957.4 billion yen ($340.5 billion) – a trade deficit of 4.8 trillion yen ($48 billion).

Economists say some of the deficit is due to the 2011 Fukushima nuclear crisis which forced the country to turn from nuclear power to more expensive fossil-fuel alternatives; some 90 per cent of Japan’s energy supplies come from imports.

The yen fell against the greenback by 18.9 per cent from a year earlier in the January-June period, the Finance Ministry said.

A falling yen should theoretically encourage and strengthen exports by making Japanese products cheaper abroad and boosts the value of overseas revenues in yen terms. However, it also has the secondary result of raising import prices.

That means Japanese imports – of everything from German and US automobiles to other manufactured goods – will become more expensive, pushing the consumer to buy locally made products.

In late January, finance ministers from a number of G8 and developing countries, including Russia from BRICS, accused Japan of manipulating the gradual devaluation of the yen since September in order to give its exports an advantage.

Japanese officials rejected the charge saying that the yen’s nearly 13 per cent drop at the time was merely a correction from already too-high levels.

Japanese officials fired back saying the Bank of Japan adopted monetary policy to ease deflation and rejected accusations of currency manipulation.

“The criticism of currency manipulation is misplaced,” then Finance Minister Taro Aso said.

Source: Agencies