Japan ran its biggest single-month trade deficit in more than eight years in May as high commodity prices and declines in the yen swelled imports, clouding the country's economic outlook. The growing trade deficit underscores the headwinds the world's third-largest economy faces from a slide in the yen and surging costs of fuel and raw materials, on which domestic manufacturers rely for production. Imports soared 48.9 per cent in the year to May, Ministry of Finance data showed on Thursday, above a median market forecast for a 43.6 per cent gain in a Reuters poll. That outpaced a 15.8 per cent year-on-year rise in exports in the same month, resulting in a 2.385 trillion yen ($17.80 billion) trade deficit, the largest shortfall in a single month since January 2014. "The weak yen is a major factor behind the rise in imports," said Harumi Taguchi, principal economist at S&P Global Market Intelligence.
"But there'll be a lag before it benefits exports," she said, adding that U.S.- and China-bound shipments faced parts supply constraints and China's strict coronavirus lockdowns. May's deficit, which was the second largest in a single month on record, marked the 10th straight month of year-on-year shortfalls and was bigger than the 2.023 trillion yen gap expected in a Reuters poll. Nearly half of Japanese companies see a weak yen as bad for their business, a private survey showed this week, suggesting the currency's declines are hurting business sentiment.