- Marcel Thieliant, Japan economist at Capital Economics
One of the key pillars of Shinzo Abe's Abenomics was a significant depreciation of the Japanese Yen, as, in theory, it should provide a substantial boost to the domestic exporters, hence, contributing to growth. In reality, however, an increase in exports was not able to outweigh the surge in the amount of imported goods and services, resulting in the largest ever trade deficit in March.
The Ministry of Finance said the trade gap quadrupled on a annual basis, hitting 1.45 trillion yen in March, up from 356.9 billion in the same month a year earlier. Shipments from the third largest economy climbed only 1.8% to 6.38 trillion yen, mostly due to higher exports of cars and fuel products. In contrast, imports rocketed 18.1% to 7.83 trillion yen on the back of higher imports of crude oil and liquefied natural gas. The economy is highly dependent on the energy imports as all Japanese nuclear reactors were closed following the disastrous earthquake and tsunami 3 years ago. The increase in imports was attributed to a stronger demand ahead of the April's sales tax hike that has been increased to 8% from 5%, while politicians are planning to make another hike in October 2015, when the tax will reach 10%. The Yen was almost 9% cheaper against the greenback in March, compared with a year ago, however, such a decline was not able to provide a boost to exports. Imports are projected to decrease in the coming months due to the sales tax hike and potential reopening of nuclear reactors.
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