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Japan trade deficit swells to biggest in 2 years PDF Print E-mail
Sunday, 24 February 2008

Agence France-Presse . Tokyo

Japan's trade deficit ballooned to the biggest in two years in January as US-bound exports shrank and oil import costs swelled, official figures showed Thursday.

A US economic slowdown is putting the brakes on Japan's export growth, raising concerns about the overall outlook for Asia's largest economy.

But at the same time shipments to other Asian nations and to Europe remain buoyant, helping to reduce the effect of the US subprime loan crisis. Japan ran a deficit of 79.34 billion yen ($735m) in January, up 22-fold from 3.49 billion yen a year earlier, the finance ministry said.

That was much worse than market forecasts for a deficit of 5.6 billion yen. 'Exports maintained double-digit growth for more than two years from late 2005 but they are now losing steam,' noted Goldman Sachs senior economist Naoki Murakami. Japan's trade balance tends to worsen in January due to the New Year holidays, but even so Murakami predicted that Japan's trade surplus was 'likely to be on a downtrend as exports show a clearer slowdown.'

Exports rose 7.7 per cent to 6.41 trillion yen on a continued fall in shipments to the United States and slower growth in exports to China. Imports increased 9.0 per cent in January from a year earlier to 6.49 trillion yen, the highest figure for the month of January, with imports of crude oil surging 41.0 per cent by value, the ministry said.

The trade surplus with the United States fell 4.8 per cent to 540.7 billion yen, with exports slipping 3.2 per cent, down for a fifth straight month, the longest losing streak for almost four years. Growth in exports to mainland China slowed to 4.6 per cent, against a 50.7 per cent upsurge a year earlier, as electronics parts shipments slumped.

But the trade surplus with Asia overall jumped 76.2 per cent to 293.6 billion yen as exports climbed 8.2 per cent and imports went up 3.9 per cent. The surplus with the European Union surged 22.6 per cent to 347.7 billion yen with exports up 10.6 per cent and imports 5.1 per cent higher.

'Exports to all destinations apart from the US remain healthy,' noted Macquarie Securities economist Richard Jerram. He said the strength in shipments to commodity exporting countries was 'particularly striking.' But he added: 'Considering the problems in the US it is likely that the strong recent export growth will fade in coming months.'

At the same time, with oil prices simmering at all-time highs above 101 dollars per barrel, Japan's import growth is likely to remain strong, analysts said. In terms of volume, however, overall imports fell 1.9 per cent in January, down for an eighth consecutive month, due to slow domestic demand.

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