1st LD Writethru: Japan's trade deficit in Sept. bigger than forecast due to weak exports

Japan's trade deficit for September came in below median analysts expectations for a gain as a sluggish 0.6 percent rise in exports saw the deficit standing at 114.5 billion yen (about 955 million U.S. dollars) compared to expectations for a 87 billion yen surplus, the finance ministry said Wednesday.

The figure in the recording period marls the sixth month of red ink as exports rose just 0.6 percent versus expectations for a 3.8 percent increase and imports retreated 11.1 percent, moderately better than analysts' predictions of a 12 percent decline.

According to leading economists, the figures point to the economy still faltering at the tail end of the third quarter and may be the biggest indicator yet that the economy has entered a technical recession.

If this is the case, there will be increased pressure on the Bank of Japan, whose outlook has tried to be optimistic despite downside pressures from overseas economies, particularly those in East Asia where tepid growth is impacting Japan's export figures, to unleash more monetary stimulus measures to bolster the economy here and to ensure their reflationary efforts remain on track.

According to the ministry's preliminary report, Japan's exports to the United States expanded by 10.4 percent and those to the European Union were up 5.1 percent on year. However those to Asian countries declined by 0.9 percent, with a 3.5 percent drop in exports to China being particularly noteworthy, economists said.

The country's trade deficit for the April to September period, however, shrank 76 percent from a year earlier to 1,308.6 billion yen (10.9 billion U.S. dollars), owing largely to a fall in prices for crude oil.

The figure marks the ninth straight half-year of red ink as the government is still failing to maintain its balance sheet owing to the costs of importing fossil fuels in the wake of the 2011 Fukushima nuclear disaster, and despite the global oil glut impacting prices, the comparatively weak yen has pushed up resource-poor Japan's tab for fossil fuel from overseas.

The value of imports fell 5.5 percent to 39,067.6 billion yen owing to crude oil prices falling 34 percent,while that of exports increased 5.2 percent to 37,759.0 billion yen, the ministry said, adding that the yen lost almost 19 percent year on year against the U.S. dollar to 121.76 yen.

Naturally a cheaper yen boosts the competitiveness of exports in overseas markets and sees profits boosted when the funds are repatriated on favorable exchange rates, but conversely when the yen is weak import costs rise commensurately.

In the April to September period, the ministry said, exports to the U.S. increased 14.6 percent to 7,506.1 billion yen, while imports from the U.S. were up 10.4 percent to 4,106.0 billion yen.

Exports to China were up by 0.9 percent to 6,698.7 billion yen, and imports increased 6.4 percent to 9,662.1 billion yen.

Meanwhile, exports to the European Union grew 4.5 percent to 3,896.0 billion yen, while imports increased 6.7 percent to 4,267.0 billion yen. Enditem