Exports climbed 6.4 per cent in January from a year earlier, the first rise in eight months. However, imports increased more dramatically at 7.3 per cent, as resource-starved Japan continued to increase its reliance on oil and gas from other countries.
Japan's fuel imports have risen since its 2011 earthquake and tsunami disaster, which forced most of its nuclear power plants offline.
Investors disregarded the bad economic news Wednesday, however, as Tokyo stocks closed 0.84 per cent higher.
Weakness in the yen that aids exporters such as Sharp Corp. and Sony Corp. also means the country pays more to import fossil fuels needed as nuclear reactors stand idle after the Fukushima crisis in 2011.
"The trade deficit means the yen can't just keep weakening," said Takeshi Minami, chief economist at Norinchukin Research Institute Co. in Tokyo. "Abe will probably restart some nuclear plants after the upper house elections in July as, without them, the costs to the economy are too great," according to Bloomberg.
The yen fell after the data were released, before reversing course to trade 0.1 per cent higher at 93.51 at 12:33 p.m. in Tokyo. The Nikkei 225 Stock Average was 0.8 per cent higher.
Nearly 80 per cent of Japan's imports were denominated in foreign currencies in the second half of last year, compared with about 60 per cent of exports, according to the Finance Ministry.
Exports to China rose 3 per cent from a year earlier, the first increase since May, while those to the U.S. gained 10.9 per cent, today's data showed. Shipments to the European Union fell 4.5 per cent.
A central bank board member said the yen's fall was helping exports -- they posted their first annual rise in January in eight months -- and said the Bank of Japan would push on with its policy, but analysts expect trade deficits to persist for some time yet.
Prime Minister Shinzo Abe has staked his political career on lifting Japan out of decades of malaise through aggressive fiscal and monetary policy, but the data indicated a rise in exports on its own was not enough to turn things around.
"This shows that on a net basis money is leaving the country. We need to turn this around by increasing our earning power from exports. A weak yen will help, but it won't solve all our problems," said Reuters.
The finance ministry data showed Japan suffered a shortfall of 1.63 trillion yen ($17.4 billion) in January, the worst deficit on record for a single month, exceeding the previous record of 1.48 trillion yen for the same month last year.
Comparable data began in 1979. Japan tends to post bad trade figures in January, with exports stalling because of New Year holidays.
Economists on average had expected a shortfall of 1.3 trillion yen.
A lower yen is good for Japanese exporters but there have been accusations in recent weeks, particularly in Europe, that Tokyo is deliberately trying to manipulate currency rates.
The yen was trading around 93.70 to the dollar early Wednesday.
The yen has fallen more than 13 per cent against the dollar in the past three months as Prime Minister Abe calls for aggressive monetary easing to end deflation.
Source: http://www.barcelonanews.net/index.php/sid/212708898/scat/3a8a80d6f705f8cc
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