For the month of January, Japan's merchandise exports didn't grow as the markets were expecting them to! According to analysts, this is mainly due to weak demand from China, which has led to a very big trade deficit. In fact, one of the largest trade deficits in the history of Japan.
After weak Thursday trade figures, the GDP data of Japan also turned out to be weaker than expected. Overall, the current conditions in Japan mean more challenges for the central bank. The Bank of Japan is on an agenda to boost economic growth in the country while keeping inflation above the 2% target.
High-Interest Rates Are Affecting Demand
According to analysts, economies around the world introduced aggressive rate hikes in 2022. But at the same time, Japan stayed on its previous policy of low or even negative interest rates. As a result, there's now less demand for Japanese products.
In addition, the Chinese celebrated their new year holiday, which also led to less demand for Japanese products.
The actual value of the merchandise exports by Japan increased by 3.5% during January. As per the MOF, the current data was better than the economist's estimate of 0.8%. But when compared with the last month's value of 11.5% (annual), it was a major downgrade.
Good imports in Japan saw an increase of 17.8%, while the last month's value was 20.7%. Similarly, the forecast for this month was around 18.4%.
Overall, the trade deficit arising from January's merchandise trade was $26.07 billion or around 3.49 trillion yen. According to experts, that's a record that was only last seen somewhere around 1979.
The products which boosted Japan's import bill were crude oil, LNG, and coal - Basically, all of these are energy products and were thus unavoidable.
For now, Japan is the 3rd largest economy, and the current data reveals that its growth was only 0.6% during the 4th quarter. As per the analysts, this has to do with a decline in business investment in the country.