Japan February Trade Balance: Deficit Narrows But Worse Than Forecast

The Japanese trade deficit in February narrowed sharply from the previous month's record high, the Finance Ministry reported Wednesday morning, as exports regained some momentum after a slump during the Lunar New Year, while imports grew at a slower rate.

The data showed that exports rose 9.8 percent year on year in February, while imports rose 9.0 percent.

The monthly trade deficit of ¥800.3 billion ($7.9 billion) was larger than a median forecast for a ¥595 billion deficit in a poll of economists by the Wall Street Journal and the Nikkei. But it was greatly reduced from January's record deficit of ¥2.8 trillion. The deficit a year ago was ¥781.3 billion. The run of trade deficits has now extended to the 20th straight month, a new record under the current data format that started in 1979.

Surging imports have recently weighed on the trade balance as domestic importers rushed to stock up on luxury cars, iPhones and expensive furniture ahead of an increase in the sales tax on April 1, the Wall Street Journal reported. The slowdown indicates that the surge in imports may have run its course.

Economists believe January's large deficit was exaggerated by the Lunar New Year holiday, when exports to China tend to take a breather.

Still, with fossil-fuel imports running high due to a shutdown of nuclear power plants, and much production in Japan having been moved offshore in recent years, the trade balance is unlikely to turn positive anytime soon.