"Foreign officials are becoming increasingly vocal over the possibility that Japan's policy actions have the potential to prompt a currency war"
- Izumi Devalier, a Japan economist at HSBC Holdings Plc
Japan logged a record trade deficit in 2012, due to the significant drop in exports, the finance ministry said in Tokyo on Wednesday. Trade deficit almost tripled to a record ¥6.927 trillion ($78.3 billion) last year, adding more pressure to Shinzo Abe to weaken the Yen as trade tensions weighed on the balance. At the same time, shipments dropped 5.8% in the last month of 2013 from a year earlier, with exports to China and the U.S. falling 15.8% and 0.8%, respectively. With imports adding only 1.9% and exports tumbling for seven months, the nation's trade shortfall in December stood at 641.5 billion yen. The report also showed that the trade deficit is expected to narrow to 5.6 trillion yen from 6.2 trillion yen by the end of 2014.
"Foreign officials are becoming increasingly vocal over the possibility that Japan's policy actions have the potential to prompt a currency war," said Izumi Devalier, a Japan economist at HSBC Holdings Plc in Hong Kong. "I think the government will avoid taking the rhetoric too far."
"These are bad numbers for the economy," said Junko Nishioka, chief economist at RBS Securities Japan Ltd. and a former BOJ official. "The positive impact of the yen's decline on exports has yet to be seen, but it is already boosting import values."
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