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Tokyo reports first trade deficit in seven months

Text by AFP

Latest update : 2008-12-10

With exports to the United States tumbling 21.8%, Japan reported its first trade deficit in seven months. The August deficit was 324 billion yen (3.05 billion US dollars); in August the previous year, the trade surplus was 743.65 billion yen.

Japan reported its first August trade deficit in 26 years Thursday as exports to the United States plunged, dousing hopes of a quick recovery in Asia's largest economy.

The gloomy data added to fears of a recession in Japan, which has relied on brisk demand for its cars, electronics and other goods to power an economic recovery from a slump stretching back more than a decade.

Japan logged a trade deficit of 324.0 billion yen (3.05 billion dollars) in August, compared with a year-earlier surplus of 743.65 billion yen, the finance ministry reported.

It was the first deficit in seven months. Excluding the month of January, when exports tend to be slow due to New Year holidays, the last time the trade balance fell into the red was 26 years ago.

Imports rose 17.3 percent by value on soaring oil costs. Exports edged up just 0.3 percent as shipments to the United States and Western Europe tumbled.

"There is no prospect of a recovery in Japan's economy in the foreseeable future as the financial crisis is expected to continue," said Yoshikiyo Shimamine, chief economist at Daiichi Life Research Institute.

"Even though the surge in commodity prices is beginning to ease, declines in exports might spread to the rest of Asia, which had been one of the main drivers of Japan's growth in recent years," he added.

The weak global economic climate contributed to the lacklustre trade performance in August.

Exports to the troubled US economy tumbled 21.8 percent, down for a 12th consecutive month. Shipments to the European Union fell 3.5 percent. Exports to the rest of Asia rose 6.7 percent.

The global economy is worsening due to the financial crisis, causing US-bound exports to weaken, said economic and fiscal policy minister Kaoru Yosano.

But Yosano, who was reappointed to his post on Wednesday by new Prime Minister Taro Aso, said the trade deficit should be "a temporary phenomenon."

"This doesn't mean that the Japanese economy is seriously ill," he said.

Soaring energy costs continued to pressure the trade balance. Imports of crude oil jumped 64.3 percent by value.

Japan has enjoyed brisk exports in recent years, helping Asia's largest economy to recover from the "lost decade" of economic stagnation and deflation. But the Japanese economy shrank last quarter, stoking fears of a recession.

The latest data "reconfirmed slowing global demand," agreed UBS economist Akira Maekawa.

Aso has pledged to kick-start Japan's economy, the second largest in the world, through government spending, suggesting fiscal reforms will be put on the backburner.

Date created : 2008-09-25

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