The Bank of Japan ended a policy meeting on Wednesday with no change to its strategy of doubling the monetary base to reach a 2 per cent inflation target and jolt the economy out of two decades of stagnation. That outcome was expected.
The central bank said in a statement, though, that there is a "high degree of uncertainty concerning Japan's economy" and that prices show no signs yet of rebounding.
Japan's economy grew 3.5 per cent last quarter, but progress in increasing exports and boosting corporate investment and wages has lagged. A weakening in the Japanese yen linked to the aggressive monetary easing has helped stabilize exports, which climbed 3.8 per cent in April from a year earlier, but it is also accentuating rising import costs.
The trade deficit jumped nearly 70 per cent over a year earlier to 879.9 billion yen ($8.6 billion) in April, according to preliminary figures reported Wednesday by the Finance Ministry.
Japan's trade deficit ballooned to a record $83.4 billion in the fiscal year that ended in March, as imports climbed and a surge in exports to the U.S. failed to offset the impact from territorial tensions with China and weak demand from crisis-stricken Europe.
In April, exports totalled 5.78 trillion yen ($56.3 billion), but their increase was dwarfed by a 9.4 per cent jump in imports, to 6.66 trillion yen ($64.9 billion).
The yen has slid in value by over 20 per cent against the U.S. dollar and euro, in turn pushing up other currencies in relative value. That has raised costs for imports of crude oil, gas and other commodities for this resource-scarce nation.
In April, the cost of oil imports slipped as crude oil prices moderated, but the value of imports of liquefied natural gas jumped 18 per cent from a year earlier. Japan's demand for natural gas has ballooned since most of its nuclear power plants remain closed following the March 2011 accident at the Fukushima Dai-ichi plant. The deterioration in the trade balance is adding to pressure from the pro-nuclear government to restart more plants.
Prime Minister Shinzo Abe has made a recovery of Japan's export industries a priority of his administration. While he's achieved the end to what the Japanese called the "endaka," or high yen era, longer-term structural reforms to improve Japan's international competitiveness are still pending.
The U.S. remained Japan's biggest export market in April, as shipments rose 15 per cent to 1.1 trillion yen ($10.7 billion), while imports edged up less than 1 per cent to 534 billion yen ($5.2 billion), leaving a surplus in of 563 billion yen ($5.5 billion).
The deficit with China rose 60 per cent to 442 billion yen ($4.3 billion) as exports edged slightly higher from a year earlier to 998.4 billion yen ($9.7 billion), while imports surged 13.3 per cent to 1.44 trillion yen ($14 billion). Exports to the European Union fell 3.5 per cent.