Japan logs record trade deficit in January

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Japan posted a record trade deficit in January, data showed on Monday, as fuel imports rose following last year's nuclear disaster while exports were hit by a strong yen and slumping demand in Europe.

The January deficit came in at 1,475 billion yen ($18.5 billion), the highest since records began in 1979, the finance ministry said.

The record figure comes after Japan registered its first annual trade deficit in 31 years in 2011, triggering warnings that the country was likely to see more negative figures throughout the year.

The latest figure was more than triple the year-before shortfall of 479.4 billion yen and far exceeded the previous monthly record of 967.9 billion yen in January 2009 during the financial crisis.

It was the fourth straight monthly deficit but in line with a 1.468 trillion shortfall expected by economists surveyed by Dow Jones Newswires.

Japan's overall exports tumbled 9.3 percent to 4,510 billion yen last month because of lower shipments of semiconductors and other electronic devices.

'We expect this trend of deficit to continue until early 2013' with fuel demand for thermal power generation staying strong while slow global demand and the high yen hurts exports, said Barclays Capital economist Yuichiro Nagai.

Imports surged 9.8 per cent to 5,985 billion yen, with purchases of liquefied natural gas shooting up 74.3 per cent and coal rising 26.5 per cent.

Demand for fossil fuel has surged in Japan after the March 11 earthquake-tsunami disaster sparked the world's worst nuclear accident in 25 years, leading the government to take many atomic reactors offline.

Satoshi Osanai, economist at Daiwa Institute of Research, also said 'the trade deficit is likely to continue' for the time being, adding that Europe's debt woes have also dealt a blow to trade.

"The US economy is underpinning (Japanese) exports, as seen in higher US-bound shipments of automobiles, but demand from Europe is weak," he said.

Japan's surplus with the European Union in January dived 98.9 per cent to 700 million yen, with shipments falling 7.7 per cent to 531.3 billion yen. Exports of automobiles dived 29.7 per cent and electronic parts slumped 30.2 per cent.

European demand has slumped owing to the ongoing debt crisis that threatens to plunge the global economy back into recession.

With the United States, Japan's trade surplus fell 7.6 per cent to 265.3 billion yen.

Japan logged a trade deficit of 357.1 billion yen with the rest of Asia, the first shortfall in three years. It ran a record deficit of 587.9 billion yen with its biggest trading partner China, due partly to Lunar New Year celebrations there.

But while Nagai at Barclays expects the negative trade balances to continue, he said exports were likely to start picking up 'in a few months', catching up on growth in imports and eventually reversing an overall deficit.

"We believe the US economy will gain steam first, which will then help shore up Asia's slowing economy," he said, arguing it would benefit Japan's shipments of electronic components to Asia.

"A recovery in the European economy is likely to come last, probably in late 2012 or early 2013," he said.

Nomura Securities chief economist Takahide Kiuchi said Japan's deficit was expected to narrow towards April-June unless oil prices see a big rise.

"Industrial production and other data indicate that businesses are anticipating improvements in exports of electronics and automobiles to Asia, North America and Europe," he said.