Forex News – Japan’s trade deficit widens as exports slow down

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Japan’s exports rose less than expected in August due to the strong yen and as sovereign debt woes cloud the outlook for global demand. As exports slow down and imports surge, Japan’s trade deficit is widening, data showed today.

Despite exports rising the first time in August since the March 11 earthquake this year, the increase (on a year-on-year basis) is less than half the rate that was forecasted.

The data is likely to provide little comfort as Japan’s newly formed government tries to boost spending on reconstruction, to prevent a strong yen and waning global demand from hurting a rebound after the disaster.

Weak Japanese exports are also an ominous sign as the U.S. Federal Reserve could move toward easing U.S. monetary policy, which will result in a weaker dollar and could push the yen even higher and worsen trade conditions for Japanese exporters.

The Fed is expected to make a decision at the conclusion of its two day monetary policy meeting that ends later today.

“The impact of a slowing in the global economy is starting to become visible in Japan’s export figures,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“In the coming months exports may go back to posting year-on-year declines, meaning the economy will have no sufficient support factor unless the government quickly implements reconstruction spending.”