Japan swung to its first trade deficit in 22 months in January as exports to Asia slowed and a surge in commodity prices pushed up import costs.

Overseas shipments rose 1.4 percent in January from a year earlier, from December’s 12.9 percent gain, the Finance Ministry said in Tokyo on Wednesday. The median estimate of 23 economists surveyed by Bloomberg News was for a 7.4 percent increase. The nation reported a trade deficit of 471.4 billion yen ($5.7 billion), the first since March 2009.
The shortfall is unlikely to signal a weakening in Japan’s economy after the government raised its assessment for a second month on Feb. 21, partly on signs of reviving overseas demand. While exports to Asia grew the least since October 2009, trade figures for the first two months can be distorted by the timing of a Lunar New Year holiday celebrated in China and South Korea.
“Exports are in a recovery trend as the global economy is picking up,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “We should look at the overall trend by averaging out trades in January and February.”
Japan’s figures showing a 1 percent gain in shipments to China from a year earlier contrasted with Chinese figures that indicated a 47 percent increase.
From a month earlier, total exports rose 1 percent in January, the fifth monthly advance, the report showed.
------------Lunar New Year
“It’s hard to project how much the Lunar New Year holidays will affect trades as they change every year, so we need to look at the overall trend through March, rather than a single month,” said Seiji Adachi, a senior economist at Deutsche Securities Inc. in Tokyo.
Japan’s imports climbed 12.4 percent in January from a year earlier, reflecting rising oil prices, Wednesday’s report showed.
The yen traded at 82.64 against the dollar at 3 p.m. in Tokyo, compared with 82.77 on Tuesday. The Nikkei 225 Stock Average fell 0.8 percent.
The 1 percent export gain to China was the least since October 2009. Shipments to Asia rose 0.4 percent, also the slowest since October 2009, according to the Finance Ministry.
Japanese exporters started scaling back shipments to Asia from late January in anticipation of the Lunar New Year on Feb. 3, with people taking holidays from Feb. 2 to Feb. 8, according to the ministry. The Lunar New Year was Feb. 14 last year.
-----------Exports recovering
“When you look at shipments to the U.S., which is hardly affected by the Lunar New Year holidays, exports looked solid both in value and volume terms,” Sumitomo Mitsui Asset’s Muto said.
The value of shipments to the U.S. increased 6 percent in January from a year earlier, compared with a 16.5 percent gain in December, the report showed. The volume of exports to the U.S. gained 14.2 percent in January, compared with 16.2 percent in December. The value of exports to Europe fell 0.7 percent, compared with a 9.7 percent gain in December.
Japanese companies are tapping demand in China and other emerging nations. Kobe Steel Ltd., Japan’s fourth-largest steelmaker, said this month that third-quarter profit more than doubled on rising Asian demand. Suzuki Motor Corp., an automaker 20 percent owned by Volkswagen AG, said this month that third- quarter net income quadrupled amid growing sales in Asia.
----------------Rising energy costs
A risk to Japan’s recovery is a possible slowdown in emerging Asia, where rising energy and food prices are fueling inflation that could prompt central bankers to raise interest rates at a faster pace, according to Ryota Takemoto, an economist at Nomura Securities Co. in Tokyo.
“Rising energy costs are a risk that can’t be ignored for Japan’s economy, given the fact that the economy is becoming more closely tied with Asia,” Takemoto said.
Japan faces “chronic deflationary pressures,” Moody’s Investors Service said on Tuesday in lowering the nation’s Aa2 debt rating outlook to negative from stable.
Moody’s cited concern that Prime Minister Naoto Kan’s efforts to reduce the country’s debt will be constrained by political gridlock, with the opposition controlling the upper chamber of parliament.
(Source: Bloomberg)