Trade troubles for Japan

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Trade troubles for Japan

Trade troubles for Japan
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The weaker yen is working both for and against Japan.

The country ran its third-biggest trade deficit ever in July – the equivalent of 7.79 billion euros – almost double the amount of a year ago.

The weak yen and rising oil prices made energy imports more expensive, which is likely to hit company profits.

However, on the other side of the coin, the benefits of the yen’s reduced value against other currencies were that Japan’s exports rose last month at the fastest annual pace in nearly three years.

Exports were also boosted by brisk sales of cars and electronics to the United States, Asia and even Europe which showed a recovery in overseas demand.

Analysts expect the world’s third-largest economy to head for a steady recovery, although some warn of risks such as the continued slowdown in China, Japan’s biggest trading partner.

“As a trend, exports are recovering and will keep growing because the positive effect of the weak yen will strengthen in coming months,“said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute in Tokyo.

“Hopefully that will offset risks, notably the possibility that China’s economic recovery will remain weak.”

The 12.2 percent rise in exports in the year to July was less than a median estimate for a 13.1 percent increase but was the biggest gain since December 2010, data released on Monday by the Ministry of Finance showed.

Exports to the United States, Asia and Europe all accelerated. Export volume also rose for the first time in over a year, offering more evidence that overseas demand could strengthen further.