Japan logs June trade deficit, but exports jump

Japan logged another trade deficit in June on soaring import costs, reversing a year-earlier surplus although shipments picked up to key export markets including the US, China and Europe. The $1.82 billion shortfall come a day after Tokyo lifted its view on the state of the world's third-largest economy, using the word "recovery" for the first time in a nearly a year and hinting an end to more than a decade of deflation was near. The trade data is a key signal for economists trying to pin down whether Prime Minister Shinzo Abe's "Abenomics" programme of big government spending and aggressive monetary easing is rippling through the economy. On Sunday, Abe's Liberal Democratic Party won upper house elections, giving him more legislative muscle to press on with his bid to fix the economy, which has suffered from years of growth-sapping deflation that crimped private spending and business investment. The measures have weakened the yen sharply since Abe came to power late last year, a boost for exporters such as Toyota and Sony. The cheaper currency makes exporters more competitive overseas and inflates the value of their repatriated foreign profits. On Wednesday, Japan's finance ministry said the country logged a June trade deficit of 180.8 billion yen as import costs outpaced gains in exports. That marked the longest string of monthly shortfalls in more than three decades, the ministry said. Japan's import costs surged in the wake of the 2011 Fukushima nuclear crisis when it shut down its atomic reactors and turned to pricey fossil-fuel alternatives, knocking the nation's already lumbering economy. For the month, imports climbed 11.8 percent as the weaker yen made incoming shipments more expensive. Exports meanwhile climbed 7.4 percent to 6.06 trillion yen, growing for the fourth straight month as weak demand in Europe picked up and the value of car shipments to the United States rose. Shipments to China were up 4.8 percent as the impact of a territorial dispute that erupted last year between Tokyo and Beijing -- which hammered demand for Japanese goods -- appears to have faded. In April, new leadership at the Bank of Japan -- handpicked by Abe -- vowed to hit a two-percent inflation target within two years in a bid to vanquish deflation, jack up asset purchases including government bonds, and double the money supply. Earlier this month, the central bank used the word "recover" in reference to the economy for the first time since 2011, pointing to a pick-up in investment as well as consumer and business confidence. On Tuesday, the Cabinet Office gave its third monthly upgrade, saying: "The economy is picking up steadily and shows some movements on the way to recovery." It is the first time it has used the word in 10 months. Officials added that years of falling prices appeared to be reversing course. Deflation is bad for the economy because it encourages consumers to put off purchases in the hope of getting them cheaper down the road, which hurts producers. Official data indicates the efforts are working as consumer prices in May were flat from year-earlier levels, after half a year of declining figures.