Japan imports surge on weaker yen

Japan imports rose by more than 40% in September for the fifth month in a row, reaching the highest level ever observed. This result was due to the fact that the falling yen exacerbated the already high cost of fuel imports, thereby raising fears of cost inflation.

Growth in imports outpaced exports, leading to a trade deficit of 2 trillion yen ($13,3 billion). This stretched the deficit period to 14 months and subsequently increased downward pressure on the Japanese currency.

Japan's trade deficit ballooned to a record 11 trillion yen in the first half of the fiscal year through the end of September, according to the Finance Ministry, driven by rising fuel bills and a 20 percent depreciation of the yen against the dollar during that period.

Persistent deficits have worsened Japan's terms of trade, causing income to shift overseas and undermining the country's purchasing power.

Previously, the weakness of the yen was welcomed because it made exports more competitive. Now the fragile currency is hurting households and retailers by raising the already prohibitive prices of imported fuel and food.

Takeshi Minami, chief economist at the Norinchukin Research Institute, said that rising exports in no way reflect the strength of domestic demand. Instead, higher living standards will force households to "tighten their belts”.

A weak yen could inflate the value of exports, but external demand would slow. Minami fears that Japan could follow Europe and the United States into recession next year.

Treasury Department data showed that Japan's imports rose 45,9% year on year in September, primarily due to crude oil, liquefied natural gas and coal. It was the 20th consecutive month of growth, and imports rose to 11 trillion yen, the most since 1979.

Exports were up 28,9% in September compared with the same month a year ago, thanks to U.S. auto shipments and demand for chips and electronic components in South Korea.

Exports to China rose 17,1% year-over-year in September, driven by demand for automobiles and chip-making equipment.

Shipments to the U.S. rose 45,2% year-over-year, driven mainly by shipments of automotive, construction and mining equipment.