Sagging export markets in Europe and Asia left Japan with a much worse-than-expected trade deficit, figures showed yesterday, ringing alarm bells over the parlous state of the global economy.
The rumbling debt crisis in Europe and slowing demand in Asia — until recently a bright spot on the economic horizon — are taking their toll, with analysts sounding warnings that things are getting “even more serious.”
Japan’s trade with the rest of the world for last month showed a shortfall of ￥517.4 billion (US$6.5 billion), the largest-ever deficit for the month and nearly double the ￥275 billion deficit that had been forecast.
The figure also marked a drastic reversal of June’s numbers, when Japan recorded a small but respectable surplus of ￥60.3 billion.
The data showed “the recent trend in which weakness in China and Europe has been putting major downward pressure on Japan’s trade is getting even more serious,” said Takahiro Sekido, Japan strategist of Global Markets Research at Bank of Tokyo-Mitsubishi UFJ.
The latest figures “indicate that they are not just risks anymore but a reality,” he told Dow Jones Newswires, adding the result may encourage the Bank of Japan to take “preemptive” action to shore up the economy, where exports play a vital role.
He said he expected the next monetary easing moves by the Japanese central bank to come in late October, when it is slated to release a semi-annual outlook report.
Overall exports slid 8.1 percent to ￥5.31 trillion with shipments of electronic parts falling, even as automobile exports rose.
By region, exports to the EU plunged 25.1 percent year-on-year amid the debt crisis. Imports from the EU rose 10.6 percent, leaving Japan with a deficit of ￥95.2 billion with the embattled economic zone.
Exports to China fell 11.9 percent against a 3.3 percent rise in imports, making Japan’s deficit with its biggest trading partner nearly double that in June at ￥250.1 billion.
Japan’s combined exports to other leading economies in Asia — South Korea, Hong Kong, Taiwan and Singapore — also fell a sharp 14.2 percent.
US-bound shipments rose 4.7 percent, slower than the 15.1 percent rise in June, while imports turned up 7.6 percent.
Japan’s trade would continue to show a deficit “as we’ll see more increases in imports due to higher energy prices” Mizuho Securities Research and Consulting senior economist Norio Miyagawa said, although he added that a pick-up seen in the US economy provided some hope.
Japan’s overall imports rose 2.1 percent to ￥5.83 trillion on the high cost of liquefied natural gas following the tsunami-sparked nuclear power crisis at Fukushima in March last year.