Thu, Feb 24, 2011 - Page 10 News List

Japan posts first trade deficit in nearly two years


Japan posted its first trade deficit in almost two years last month, officials said yesterday, amid rising commodity prices and weak demand for its exports ahead of China’s Lunar New Year holiday.

The finance ministry said exports, a key driver of Japan’s economy, rose just 1.4 percent last month — the 14th consecutive month of growth, but a well off the 13 percent on-year surge in December.

That came as instability in the Middle East and North Africa pushed the price of oil and other commodities up amid concerns supplies could be cut, sending resource-poor Japan’s import bill up 12.4 percent.

And analysts warned that with commodity prices looking set rise further Japan could see its cost of imports continue to grow.

The trade deficit for export-dependent Japan, which is struggling to revive its sagging economy, stood at ¥471.42 billion (US$5.7 billion), compared with forecasts for a ¥49.6 billion surplus.

Yesterday’s trade data showed Japan’s imports last month at ¥5.44 trillion as the country was forced to pay more for iron ore and petroleum products as well as oil.

Exports were ¥4.97 trillion, modestly higher than a year earlier, thanks partly to demand for steel and construction machinery.

“Exports to China grew by only 1 percent in January, compared with 20.1 percent in December,” a finance ministry official said.

“Overall exports, mainly to China and other parts of Asia where people celebrate the Lunar New Year holiday, slowed because of shipping adjustments,” he said of the lead-up to the holiday.

The economy, hit hard by the global downturn, is however broadly gathering steam as wider overseas demand remains strong, and officials predict the trade balance will swing back to black soon.

“The global economy has been recovering since late last year while a relatively lower yen is also helping Japanese exporters,” said Hiroshi Watanabe, economist at Daiwa Institute of Research.

However, Watanabe said the trade balance could be squeezed further in the coming months because of higher commodity prices, especially crude from the Middle East where Japan sources 90 percent of its oil.

“There are three main factors behind the surging commodity prices,” he said. “Emerging economies are expanding further. Speculative capital is also hiking prices due to monetary easing policies of the world’s major economies. Finally, the instability in the Middle East is pushing prices of oil and other resources higher.”

The Bank of Japan this week upgraded its view of the economy for the first time in nine months on accelerating global growth but kept its easy monetary policy in place due to persistent deflation.

Japan’s real GDP slipped an annualized 1.1 percent in the December quarter as expiring auto subsidies hit car sales, a new tobacco tax sapped cigarette demand and a strong yen hurt exports.

However, the contraction was smaller than expected, and there are hopes the economy will pick up this quarter.

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