Japan yesterday logged a record trade deficit for last year as exports were hit by a bitter diplomatic spat with its biggest market, China, and plunging demand in debt-wracked Europe.
The gloomy numbers spell more bad news for the world’s third-largest economy as it struggles to cement a recovery after the 2011 quake-tsunami and the disaster at the Fukushima Dai-ichi nuclear power plant — the worst nuclear crisis in a generation — and the impact of an export-sapping strong yen.
They also underscore the size of the task ahead for the new government of Japanese Prime Minister Shinzo Abe, who won last month’s election on a pledge to boost the economy with big public spending and by pressuring the central bank for a more aggressive monetary policy.
Official figures from the Japanese finance ministry showed Japan’s trade shortfall last year totalled ￥6.92 trillion (US$78 billion), with the deficit last month alone standing at a higher-than-expected ￥641.5 billion.
The data marked a second consecutive annual trade deficit for the export-reliant economy.
Last year, exports totalled ￥63.7 trillion against imports of ￥70.7 trillion, with post-Fukushima energy imports of expensive fossil fuels surging as all but two of Japan’s 50 nuclear reactors remain closed.
However, analysts said last year’s figures may mark a low point for Japan’s trade picture as the global economy stages a recovery with China and other Asian economies leading the pack, while the US economy also improves.
“The figures will likely be better in 2013 as overseas economies improve,” said Masahiko Hashimoto, an economist at the Daiwa Institute of Research in Tokyo, adding that the impact of a territorial feud with China would probably fade.
“The European economy may continue to worsen until the middle of the year, but China and other Asian economies are likely to lead the global economy,” he said.
However, the deficit would likely remain for the short term as a weakening yen makes overseas energy imports pricier, Hashimoto said.
“But I believe exports will eventually pick up. [The weaker yen] will be a positive for the economy in the long term,” he added.
While Japan ran a trade surplus last year with the US, it recorded an annual deficit of ￥139.7 billion with the EU, its first as the continent’s sovereign debt crisis crippled demand for everything, from Japanese televisions to cars.
The deficit with Beijing doubled to a record ￥3.52 trillion, as a feud over a set of islands in the East China Sea — which are also claimed by Taiwan — spurred a consumer boycott of Japanese goods in China.
The dispute flared in September last year after Tokyo bought three of the Diaoyutai Islands (釣魚台) from their Japanese owners. Japan refers to the islands as the Senkakus, while Beijing refers to them as the Diaoyu Islands.