Japan Aug trade deficit seen at 9-year high as weak yen boosts imports

By Kantaro Komiya

TOKYO (Reuters) – Japan likely recorded its biggest trade deficit in more than nine years in August as the yen’s plunge to 24-year-lows swelled import costs, a Reuters poll showed on Friday.

The sharp slump in the yen has triggered fresh verbal warnings from Japanese policymakers this week, while economists have said the currency depreciation could push Japan’s core inflation to around 3% by year-end, squeezing households’ purchasing power.

The August trade balance likely ended in a deficit of 2.398 trillion yen ($16.80 billion) because a 46.7% surge in imports outstripped a 23.6% rise in exports, the economists’ median estimate in the poll showed.

The expected shortfall would mark the biggest monthly record since the 2,790 trillion yen deficit in January 2014.

“While the rise in prices stalled after July, the yen’s decline pushed up the cost of imports,” said Kenta Suwa, economist at Mizuho Research and Technologies.

The world’s third-largest economy grew an annualized 3.5% in April-June on robust household and business spending thanks to the easing of COVID-19 curbs, revised gross domestic product data showed on Thursday.

But analysts are not as optimistic for Japan’s growth outlook amid risks to demand from inflation and the weakening global economy.

Other data due next week is likely to show Japan’s annual wholesale inflation reached 8.9% in August, re-accelerating from 8.6% in July in a sign firms are facing relentless price pressures that are squeezing profits, the poll showed.

Core machinery orders, a leading indicator of business spending, were expected to drop 0.8% month-on-month in July after a 0.9% increase in June, the poll also showed.

The government will release the trade figures at 8:50 am on Sept. 15 (2350 GMT, Sept. 14) and the machinery orders date at 8:50 am on Sept. 14 (2350 GMT, Sept. 13).

The Bank of Japan will release the wholesale price data at 8:50 am on Sept. 13 (2350 GMT, Sept. 12).

(This story corrects trade balance to 2,398 trillion yen, not 2,398.2 trillion, in paragraph 3 and corrects January 2014 balance to 2,790 trillion yen, not 2,790 trillion, in paragraph 4)

($1 = 142.7700 yen)