Japan fell into a trade deficit last month, Ministry of Finance data showed yesterday, as a stubbornly strong yen, softening global demand and disruption from deadly floods in Thailand slowed its post-quake recovery.
Exports last month dropped off, while imports kept soaring, leaving a deficit of ¥273.8 billion (US$3.6 billion), the ministry said.
“Exports weakened due to a slowing global economy, while imports kept rising due to higher natural resources prices. Japan slipped into the red in a worrisome way,” Daiwa Institute of Research economist Satoshi Osanai said.
“Trade risks have taken their toll. The outlook for exports is murky,” he said. “The economy will be recovering at a slow pace in the long term, but is currently at a standstill.”
Last month’s deficit was the first in two months, reversing a year-before surplus of ¥812.6 billion. Economists had expected a surplus of ¥55.6 billion, according to a survey by Dow Jones Newswires and the Nikkei Shimbun.
Japan returned to a trade surplus in September, bolstered by auto production recovering to levels seen before the devastating March earthquake and tsunami hit output.
However, flooding in Thailand has hit the operations of automakers and electronics firms due to damage to facilities and shortages of components, with Thai plants forming a key link in manufacturers’ supply chain.
“The floods have caused parts shortages in Japan, and reduced exports from Japan to automakers’ factories in Thailand,” Capital Economics said in a research note.
Toyota and Honda withdrew forecasts as they assess the damage. Overall exports fell 3.7 percent to ¥5.51 trillion, the first drop in three months, while imports rose 17.9 percent to ¥5.79 trillion, logging a year-on-year rise for the 22nd consecutive month on higher oil and gas costs.
Asia-bound exports fell 6.6 percent with shipments to China, the biggest market for Japanese products, plunging 7.7 percent and those to Thailand down 5.1 percent.
Japan posted an annualized growth rate of 6 percent in the July-September quarter, as companies ramped up production to make up for quake-hit output, but analysts say the strong yen and global slowdown will weigh on the recovery.
Concerns have deepened over the eurozone debt crisis, which has sparked yen buying as a safe haven, helping push the Japanese unit to post-World War II highs against the US dollar, eroding exporter profits and making goods less competitive.
Yesterday’s worse-than-expected data “may signal that exports may continue to fall in coming months,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
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