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TRADE WARS
Japan sees first annual trade deficit in 31 years
by Staff Writers
Tokyo (AFP) Jan 25, 2012


Japan is to announce its first annual trade deficit for more than 30 years on Wednesday after the March quake-tsunami and strong yen hit exports, and high fuel costs pushed up import bills.

After rising from the ashes of World War II Japan established itself as a trading nation, enjoying enormous trade surpluses with its competitive cars, electronics and other exports.

But it will have slipped into the red for 2011 after the March earthquake and tsunami disrupted supply chains, and a subsequent nuclear accident left atomic reactors off-line, forcing up fossil fuel imports for power generation.

The eurozone debt crisis also slowed the global economy and sent traders scurrying into the safety of the yen, causing the currency to rocket and reducing the income of Japanese exporters.

Japan's last calendar-year trade deficit came in 1980, when the resource-poor nation was reeling from the second oil crisis and imports exceeded exports by 2.6 trillion yen.

In 2010 the country posted a trade surplus of 6.6 trillion yen but in the first 11 months of 2011 it racked up a deficit of nearly 2.3 trillion yen.

The finance ministry will release the latest trade data at 2350 GMT Tuesday, with economists expecting a further deficit for December.

"It was the worst year for Japan's trade since 1980. It was caused by slumps in exports and rises in imports due to the higher need for alternative energy," said Satoshi Osanai, economist at Daiwa Institute of Research.

"Trade went in bad directions both ways," he said, noting that export falls had been worse in the 2008 financial turmoil that followed the Lehman Brothers collapse, when Japan recorded a trade deficit over the fiscal year.

Japanese demand for oil and other fuel is unlikely to decrease in the near future and Osanai pointed out that resource prices remained high, "inflicting a big negative impact".

The strong yen, which hit repeated post-World War II highs against the US dollar in 2011 and remains close to its peak, contributes to lowering import costs but its negative effect on exports is larger.

UBS economist Daiju Aoki warned Japan was on course to record repeated trade deficits.

"As the nation ages its production capability declines, hurting export power," he said.

"Japan will come to run trade deficits over the long term. It may return to figures in the black in 2012 or 2013 but the trend of suffering deficits could start."

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