© Reuters. Cranes are seen at an industrial port in Tokyo, Japan, February 17, 2022. REUTERS/Kim Kyung-Hoon/ File Photo
TOKYO (Reuters) – Japan raised its official assessment of imports for first time in nine months, the government’s monthly economic report showed on Tuesday, as the yen’s double-digit depreciation from a year earlier puffed up the value of imported goods.
While the report maintained the overview of the economy that it was on a moderate recovery, it recognised rising bankruptcies and maintained a warning against global financial volatility it added last month in response to Western bank collapses.
The report, crafted by the Cabinet Office, said Japan’s imports are generally staying flat, modifying a previous expression that they were weak, after shipments from the United States and Asia rebounded from a February dip.
Trade data out last week showed the hefty cost of coal and oil products, coupled with the yen’s 16.5% slump from a year before, increased imports by 7.3% in March, helping bring Japan’s trade deficit for fiscal 2022 to a record high.
The government also said bankruptcies are growing in Japan, having previously said they were staying at low levels. Data by credit research firm Tokyo Shoko Research showed 809 bankruptcies filed in March in Japan, up 36% from the previous month to hit the highest level since June 2015.
A Cabinet Office official did not specify causes for the rise in bankruptcies. Analysts have said the end of the government’s COVID-19 relief programme would prompt an increase in small businesses’ insolvency.
Elsewhere in the report, the government maintained a reference to the need to monitor the impact of overseas financial and capital market fluctuations.
While worries after the collapse of Silicon Valley Bank appeared to have settled, as seen in metrics such as growing U.S. bank lending, the government must stay vigilant against financial market risks, the official told a news conference.
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Japan, the world’s third-largest economy, has recently raised its outlook on imports, signaling a brighter forecast for the nation’s economic growth.
The Bank of Japan’s (BOJ) trade balance report for January showed imports rose 0.4% from the previous year, indicating a ascent from the stagnant growth rate of 0.1% in December. This figure marks the 1st growth of imports seen since the BOJ’s September report.
The rising optimism of the import market, however, is counterbalanced by a growing number of bankruptcies seen in the nation. In January, 13,759 corporate bankruptcies were reported to the BOJ, a figure 14.6% higher than last year’s 12,000.
While the unemployment rate in Japan is currently at a low 2.2%, this surge in corporate bankruptcies could impact the rate in the long run as recession looms and businesses are being forced to make job cuts in order to stay afloat.
Nevertheless, the Bank of Japan is encouraged by the increasing imports, citing that the nation’s exports have been on a downward trend since 2017. Despite this, exports growth still managed to stay positive at 0.3%, signalling for more optimistic growth for the year.
The BOJ has thus marked the growing imports as a possible sign of better economic conditions ahead and believe that a pickup in exports could aid in further economic development.
To this end, the BOJ has expressed a degree of confidence that the Japanese economy can build off the news of imports growth and avert the possibility of a recession.