Japan is on course for its longest run of trade deficits, effectively marking the end of the nation's decades-long reliance on exports from the likes of electronics giant Sony and automaker Toyota as a driver of growth and income.
Trade figures due on Thursday are likely to show that Japan produced its 14th consecutive deficit in August, matching a 1979-1980 record run during the global oil shock. Economists say the deficits will continue.
When Prime Minister Shinzo Abe's reflationary policies weakened the yen after he took power last December, many economists had anticipated a so-called J-curve effect, where a spike in import costs would over time be more than offset by gains in exports.
But a closer look at trade statistics shows that the currency's 15 percent decline since the beginning of this year has failed to produce the export turnaround needed to bring the trade balance back into the black and there is little indication it will do so in the future, posing new policy challenges.
"I cannot tell when the trade deficit will end," said Norio Miyagawa, a senior economist at Mizuho Securities Research & Consulting Co. "What's worrying more is that Japan's export competitiveness may be waning."
With trade acting as a drag rather than an engine of growth, there is more pressure on Abe to reform the domestic economy. But so far, the structural reform part of the prime minister's "Abenomics" policy agenda has disappointed, unlike his radical monetary easing and fiscal stimulus, which have buoyed the stock market and business mood.
Source: NewsOnJapan
