Japan reports first trade deficit in five years amid high oil prices

AP , TOKYO

Fri, Feb 24, 2006 - Page 12

Japan posted its first trade deficit in five years last month as soaring oil prices and revived domestic spending boosted imports, the government said yesterday.

Separately, Japan's all industries activity index, which gauges production at a variety of industries, from fishing to services, rose to its highest level since 1988. The data reflects the steady recovery in Japan's economy.

Analysts and government officials said the trade deficit wasn't a negative sign for Japan's economy because it was rooted in strong domestic demand. Data also showed that exports continue to rise.

"We see this as a temporary deficit and expect surpluses to resume from here on," said Daisuke Yamazaki, economist at Goldman Sachs.

Imports exceeded exports by ?348.94 billion (US$2.94 billion) last month, Japan's first trade deficit since January 2001, the Ministry of Finance said.

An increase in Japanese purchases of oil, machinery and computer chips sent imports up 27 percent on year to ?5.357 trillion, marking the 23rd straight month of growth, according to ministry data.

Exports gained 13.5 percent to ?5.008 trillion, lifted by the booming demand for Japanese cars and auto parts, for the 26th consecutive month of rises.

The all industries activity index rose a seasonally adjusted 0.4 percent on month in December to 105.3, the highest level since 1988, when officials began keeping track.

"There's no doubt that the economy remains in an uptrend, underpinned by domestic demand," said Koji Fukaya, chief economist at Bank of Tokyo-Mitsubishi UFJ.