Japan yesterday announced a record current account deficit, the first such shortfall in 13 years.
The export-dependent economy has been hammered by a worldwide drop in demand for the cars, high-tech goods and machinery in which it excels, putting Japan on course for the worst recession since World War II.
Japan logged a bigger than expected deficit of ¥172.8 billion (US$1.8 billion) in January in its current account, the broadest measure of trade in goods and services, official data showed.
Exports fell by almost 50 percent, reflecting the rapidly worsening global economic climate.
The deficit was the largest since comparable records began in January 1985 and marked a dramatic turnaround from the surplus of ¥1.164 trillion a year earlier.
The figure was “shocking,” a Dai-ichi Life Research Institute senior economist Toshihiro Nagahama told Dow Jones Newswires.
“I’m afraid that Japan’s current account will likely be in the red ink for months ahead. Because we can’t expect that the US economy will hit a trough in the near term, Japan’s exports will very likely remain very weak,” he said.
Historically, Japan has run a large surplus in its current account thanks to brisk foreign demand.
“The deficit was due to the continuing deterioration in exports,” said Hiroshi Watanabe, senior economist at Daiwa Research Institute.
“We believe the trend will continue for the time being, as Japanese companies are likely to spend most of 2009 trying to adjust their inventories,” he said.
Exports fell 46.3 percent in January from a year earlier to ¥3.282 trillion, while imports tumbled 31.7 percent to ¥4.127 trillion, the Finance Ministry said.
There are fears that the government will report later this week that the economy shrank even more last quarter than an initial estimate of a 12.7 percent annualized drop.
Analysts also expect GDP to suffer another large contraction in the first quarter.
“The collapse in exports will make another large negative contribution to Japan’s GDP in the first quarter,” said Julian Jessop, an analyst at the research firm Capital Economics.
Automakers in particular are cutting production to cope with the plummeting global demand.
The market is hoping that stimulus measures in the US and China will help drive a recovery in the two nations by late this year, but a recovery in Japan is unlikely until next year, Watanabe said.
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