Japan annual trade deficit at record $134 bn for fiscal 2013

Japan's annual trade deficit in March stood at record $134 billion as exports growth was weakest in a year, pointing to a rapid loss of economic momentum as a national sales tax hike added to the strain on growth.

The Bank of Japan (BoJ) had repeatedly rejected fresh easing measures over the near term, insisting that the economy continued to remain on track to meet its 2 per cent inflation target even as investor confidence dropped on recent trade data.

However, the double-whammy of weak external demand coupled with a chill in domestic consumption from the 1 April sales tax hike to 8 per cent from 5 per cent was likely to increase pressures on the BoJ for acting earlier rather than later.

Reuters quoted Naoki Iizuka, economist at Citigroup Global Markets Japan as saying if sluggish exports persisted and domestic demand slumped more than expected in April and May, the Bank of Japan could ease policy further as early as in June or July.

Meanwhile, resource-deficient Japan's costs for energy imports had shot up since the March 2011 disaster at the Fukushima Dai-Ichi Nuclear Plant that had led to the closure of all its nuclear reactors for safety checks.

Prime minister Shinzo Abe hopes that some of those plants would restart to help cut the burden on the economy.

Japan's deficit with Middle Eastern countries that provide most of its oil and gas increased 18 per cent in fiscal 2013, to 13.7 trillion yen that accounted for the biggest share of its overall deficit.

Import costs were pushed up by the weakening of the Japanese yen last year even as exports rose at a pace lower than expected.

Marcel Thieliant of Capital Economics said in a research note increases in the trade deficit were expected to fall in the coming months.

He added, imports had increased nearly 12 per cent as measured by volume in March, on a surge in purchases ahead of a hike in the sales tax to 8 per cent from 5 per cent.