Japan’s recession woes deepened as a record plunge in exports added to fears yesterday that Asia’s largest economy is becoming one of the biggest victims of the global crisis.
Japan’s reliance on foreign markets to drive its recovery from a decade-long slump has left it particularly vulnerable to the global economic downturn, which has crushed demand for its cars, televisions and high-tech goods.
The trade deficit ballooned to an unprecedented ¥952.6 billion (US$9.9 billion) last month as exports plunged 45.7 percent from a year earlier, the finance ministry reported.
It was the worst month since comparable records began in 1979, marking a dramatic shift in fortunes for Japan’s economy, which used to enjoy large surpluses thanks to brisk demand for its high-tech products.
Once seen as relatively immune to the global downturn, Japan’s economy has become one of the worst affected, exposing the fragility of its export-led rebound after the 1990s recession.
“Japan is particularly vulnerable to this downturn because trade is so central to the economy,” WTO chief Pascal Lamy told reporters on a visit to Tokyo.
Analysts expect Japan to report tomorrow a record 10 percent drop in factory output last month from the previous month. Unemployment is also forecast to rise as corporate icons such as Sony and Toyota slash thousands of jobs.
“Because of the shrinking global economy, Japan’s business model of being dependent on exports is not working at all,” said Barclays Capital chief Japan economist Kyohei Morita.
But with the population declining and the government reluctant to admit foreign workers, Japan has no choice but to rely on overseas markets, said Morita, who sees exports falling until the third quarter of this year.
Demand for Japanese exports has been crushed by a slump in worldwide consumer spending, pushing the world’s second-largest economy into its worst recession in decades.
A surging yen has added to exporters’ troubles, making it harder for them to remain competitive.
Japanese exports to the US, the EU and even the once-resilient Chinese economy roughly halved last month. Car exports plunged more than two-thirds as automakers idled plants in response to slumping sales.
Few analysts are optimistic about the chances of a significant rebound in Japanese shipments any time soon.
“In my view the global economy is heading into a depression. So the prospect of a recovery in demand for Japan’s goods in the near to mid-term are very low,” said Kirby Daley, senior strategist at Newedge Group in Hong Kong.
The government said last week that Japan’s economy was in the deepest crisis since World War II, after contracting at an annualized pace of 12.7 percent in the last quarter of last year, the worst performance in almost 35 years.
The worsening recession comes at a time when Japan’s ruling party is facing the risk of losing its half-century grip on power, with Prime Minister Taro Aso’s popularity plunging along with the economy.
Japan’s unemployment rate rose to a near three-year high of 4.4 percent in December and looks likely to top the post-World War II peak of 5.5 percent later this year, analysts said.
“With the export sector extremely weak and the domestic economy weakening, there is a growing risk that you could get a significant rise in Japanese unemployment,” said Christopher Wood, an equity strategist at the CLSA bank.