Japan today announced a record current account deficit, the first such shortfall in 13 years, as the global downturn chokes exports and sends the economy sliding deeper into recession. The export-dependent economy has been hammered by a worldwide drop in demand for the cars, hi-tech goods and machinery in which Japan excels, putting it on course for the worst recession since the second world war. Japan logged a bigger than expected deficit of 172.8 billion yen (US$1.8bn) in January in its current account, the broadest measure of trade in goods and services, according to official data.
Exports almost halved from a year earlier, reflecting the rapidly worsening global economic climate. The deficit was the largest since comparable records began in January 1985 and marked a dramatic turnaround from the surplus of 1.164 trillion yen a year earlier. The figure was "shocking," Toshihiro Nagahama, a senior economist at Daiichi Life Research Institute, told Dow Jones. "I'm afraid that Japan's current account will likely be in the red ink for months ahead. Because we can't expect that the US economy will hit a trough in the near term, Japan's exports will very likely remain very weak," he said.
Historically, Japan has run a large surplus in its current account thanks to brisk foreign demand. But the global crisis has prompted consumers to tighten their purse-strings in the United States and Europe, prompting Japanese companies such as Toyota and Sony to launch a wave of job cuts. "The deficit was due to the continuing deterioration in exports," said Hiroshi Watanabe, a senior economist at Daiwa Research Institute.
"We believe the trend will continue for the time being as Japanese companies are likely to spend most of 2009 trying to adjust their inventories," he said. Exports dived 46.3 per cent in January from a year earlier to 3.282 trillion yen, while imports tumbled 31.7 per cent to 4.127 trillion yen, the finance ministry said. There are fears that the government will report later this week that the economy shrank even more in the fourth quarter of 2008 than an initial estimate of a 12.7 per cent annualised drop.
Analysts also expect gross domestic product to suffer another large contraction in the first quarter of 2009. * AFP