Daily Forex News - Japan Reports Record Deficit

Japan Reports Record Trade Deficit

Mar 8 • Between the lines • 1687 Views • Comments Off on Japan Reports Record Trade Deficit

For the second month in a row, Japan has reported a trade deficit. Last month, Japan reported its largest trade imbalance. This trade deficit continued and Japan has reported for the month of January the deficit was 437.3bn yen ($5.4bn; £3.4bn), the ministry of finance reported

The current account report gives the markets the broadest sense of how much Japan earns through exports and overseas investments.

The Finance Ministry’s revised figures showed the economy contracted less than had been thought at the end of 2011. On an annualized basis, the economy shrank 0.7% in the three months to the end of December, government data showed. This is much better than the 2.3% contraction expected.

In the aftermath of the tsunami and earthquake that triggered a meltdown at the Fukushima nuclear reactor, which led to shortages of fuel for generating electricity, which meant more of it had to be imported. This had a negative effect on imports and also reduced Japans ability to manufacture and export. Once manufacturing was back online the pent up demand pushed Japan exports to an exceptionally high level.

The yen fell in Asian trading to 81.26 to the US dollar, as the trade deficit ignited fears of an overall economic slowdown. Many economists are expecting a reversal this month. The trade balance is likely to stay in deficit as Japan is forced to continue to import more energy to offset the declining use of nuclear power. This is an isolated segment of the overall economy, although it has an effect, it is an effect that can be analyzed and removed from the overall equation.

The current account should swing back to a surplus as Japan still maintains a surplus in the income account. Japan should be able to finance its debt for the time being.

Other economic data released today sheds a better light on the Japanese economy.

Of overall importance was a revision of GDP which rose 4.8%, well above the preliminary expectations of 1.9%.

 

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Just a few days ago, the Chinese Premier announced new growth figures for China, saying that the government had cut its 2012 target for economic growth to 7.5%, lower than the 8% that has been the goal in recent years.

China is Japan’s major trading partner, and this change in forecast, could place some pressure on Japan’s predictions.

Market Analysts are expecting to see a rise in growth of the Japanese nation. The economy will resume growing in the first quarter as exports increase. Once the Pacific nation has had a chance to develop new energy supplies or return to use of nuclear power, their imports of energy will fall, improving figures.

Sometimes Mother Nature just won’t play nice…

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