Tokyo, January 25

Japan’s trade deficit fell to its lowest level in four years in 2015, the Finance Ministry reported today, as import costs dropped thanks to the collapse in oil prices.

Preliminary figures show exports rose 3.5 per cent in 2015 from the year before, while imports dropped 8.7 per cent. The deficit compared with a record 12.8 trillion yen deficit in 2014.

Japan slipped into deficits after the 2011 nuclear accident in Fukushima led to closures of reactors, pushing up imports of oil and gas.

Japan’s trade balance swung to a surplus in December, as oil prices tumbled and the yen gained against other currencies.

The December trade surplus of 140.2 billion yen ($1.2 billion) compared with a deficit of 379.7 billion yen in November and a deficit of 665.6 billion yen in December 2014.

However, exports have been weakening over the past year, as China’s economy has slowed. After rising 7.9 per cent in January to June over the same period the year before, exports rose a scant 0.6 per cent in July to December.

Exports to China fell 1.1 per cent in 2015, to 13.2 trillion yen ($95.8 billion), while exports to the US jumped 11.5 per cent to 15.2 trillion yen ($128.6 billion), making the US Japan’s largest export market.

Japan’s imports of crude oil, gas and other fuels plunged 43 per cent in December to 1.4 trillion yen ($11.8 billion). In 2015, they fell 34 per cent, to 18.2 trillion yen ($154 billion).

Weaker than expected demand in China, which is spilling into other Asian markets, has hamstrung growth in Japan. Meanwhile, the prolonged bout of low crude oil prices — normally a boon for a resource-scarce country like Japan which imports almost all of its oil and gas — is hindering progress toward a two per cent inflation goal meant to mark the end of a long spell of growth-dampening deflation.

“The contraction in the trade deficit will likely continue, as further declines in oil prices have kept the value of imports declining in the double digits,” Merrill Lynch said in a commentary. But it added that, “With export momentum still weak, industrial production should continue to flat-line.”

Analysts said the data raise pressure on Japan’s central bank to further ease its already ultra-loose monetary policy, partly to counter recent pressures toward appreciation of the yen, which gained value against the US dollar during the recent bout of gyrations in global financial markets.