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Japanese trade deficit hit record high in 2013

TOKYO--Japan's trade deficit swelled to a record US$112 billion in 2013, official data showed Monday, as the benefits of a cheap yen for the export-driven economy were diluted by soaring post-Fukushima energy bills.

The shortfall of 11.47 trillion yen marked the biggest deficit since comparable data started in 1979, according to the finance ministry, with the December figure alone doubling from a year earlier.

Exports rose 9.5 percent to 69.79 trillion yen last year, their first increase in three years but that was offset by a 15-percent jump in imports to their highest-ever level of 81.26 trillion yen.

Imports of fossil fuels have surged to plug an energy gap since the 2011 Fukushima crisis forced the shutdown of nuclear reactors that once supplied a third of the nation's power.

At the same time the yen has lost about a quarter of its value against the dollar since late 2012 owing to a policy blitz by Japanese Prime Minister Shinzo Abe that meshes government spending with massive central bank monetary easing.

But while the weaker yen has boosted the bottom line at exporters such as Sony and Toyota, most have not slashed overseas prices to boost demand.

“Import volumes are also rising slightly faster than export volumes,” London-based Capital Economics said after the annual data were published.

“There are no signs that the weak yen is raising the competitiveness of Japanese exports,” it added, with the country's share of global exports little changed despite the yen's plunge against the dollar.

“A major reason is that exporters have been reluctant to lower export prices,” Capital Economics said.

Shipments to China rose 9.7 percent as demand recovered following a consumer boycott on Japanese brands that was linked to a Tokyo-Beijing diplomatic row.

Exports to the key U.S. and European markets also improved.

Deficits to 'continue for some time'

Taro Saito, senior economist at NLI Research Institute, said he expected Japan's trade deficit to “continue for quite some time.”

When the yen was trading around 80 to the dollar in recent years, many firms shifted production away from Japan to cheaper bases overseas, a move that has offset the benefits of a now-cheap yen for exporters, Saito said.

The unit has weakened to more than 100 against the greenback, well down from the mid-70 levels in late 2012.

“It is getting difficult for Japan to boost exports because companies have shifted a lot of their production to foreign countries,” Saito added.

“So, the equation of a cheaper yen equaling a rise in exports in not very true anymore.”

Japan has seen a mixed bag of data recently, but the government's efforts to boost the economy appear to be taking hold.

Growth in the first half of 2013 outstripped other G7 nations, although that pace slowed in the third quarter, while November inflation data suggested the Bank of Japan was getting closer to its goal of 2.0-percent sustained inflation in two years.

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