Japan posts record deficit

Japan Thursday posted a record trade deficit for fiscal 2011 as the quake-tsunami disaster and ensuing nuclear crisis sent car and electronics exports tumbling and energy imports soaring. The country''s trade shortfall hit 4.410 trillion yen ($54.2 billion) in the 12 months to March, the finance ministry said, amid continuing worries about the recovery in the world''s third-largest economy.
For decades, Japan enjoyed huge trade surpluses owing to its competitive cars, electronics and other exports. But demand for fossil fuels has surged in the resource-poor nation after last year''s natural disasters sparked the worst nuclear accident in a generation, leading the government to take most atomic reactors offline.
At the same time demand from Europe suffered as the eurozone''s debt crisis rippled across the continent, one of Japan''s biggest export markets. Over the year Japanese exports fell 3.7 percent to 65.282 trillion yen while imports soared 11.6 percent to 69.692 trillion yen, as worries mount that the country will face energy shortages this summer.
All but one of its nuclear reactors were shuttered after the Fukushima reactor disaster. Driving the decline, electronic component exports fell 14.7 percent, followed by a 5.4 percent drop in vehicle shipments, with manufacturers'' supply chains severely disrupted by the quake-tsunami as well as floods in Thailand, where several Japanese firms have plants.
In the same period, crude oil imports rose 21.9 percent while liquefied natural gas orders shot up 52.2 percent as the country turned to thermal energy. The latest figures represent Japan''s first fiscal-year deficit since a shortfall of nearly 765.0 billion yen in 2008 as the global financial crisis kicked in amid the collapse of Wall Street giant Lehman Brothers.
"At the time of the Lehman shock, foreign demand was just gone, dealing a blow to exports," said Satoshi Osanai, economist at Daiwa Institute of Research. "This time around, however, the deficit largely stemmed from higher import costs of natural resources," he added. Energy costs will likely continue to take a toll on the trade picture, but "deficits are expected to shrink as exports recover gradually," Osanai said.
Trade with China and other emerging economies was likely to pick up, while solid demand from the United States also providing support as the world''s biggest economy mounts a recovery, he said. The European market, however, remained a concern with shipments down 3.6 percent in fiscal 2011 - reversing a 9.5 percent rise in the previous year - with exports of passenger cars, chemicals and steel products all falling.
"The European debt crisis has calmed down but their economy is still sluggish. We should keep a cautious view toward Europe," Osanai said. The ministry also released Thursday showing a smaller-than-expected trade deficit of 82.6 billion yen in March.
But analysts expressed little optimism over that figure, which came after an unexpected surplus in February. The data "have yet to show confidence in a trend that (Japan''s exports) are clearly emerging from sluggishness," SMBC Nikko Securities chief market economist Mari Iwashita told Dow Jones Newswires.
In a report, Credit Suisse said the deficit comes at a time when the global economy was mounting a recovery, which "indicates that the deterioration in Japanese trade conditions is not a temporary but a structural problem". High prices for liquefied natural gas and rising imports in a country beset by a rapidly ageing population and shrinking manufacturing sector would likely generate trade deficits through this year, it added.