Japan reports first trade deficit in 22 months

| February 23, 2011 | 0 Comments

The Ministry of Finance has today revealed Japan posted its first trade deficit since March 2009 in January, due to slower exports.

The world’s third largest economy posted a trade deficit of 471.42 billion yen (£3.52 billion) in January, with exports rising just 1.4% - analysts had forecast a rise of closer to 7%.

Meanwhile, Japanese imports rose 12.4% in January compared with levels a year ago, reflecting rising oil prices.

Demand for exports continue to weaken, due to a stronger yen. This has fuelled concern for the economy as exports are a crucial driver for economic growth and helped bring the economy out of recession much sooner than its counterparts throughout the world.

However, exports are expected to recover which, in turn, will fuel economic growth.

According to Takahide Kiuchi from Nomura Securities in Tokyo, the fall in Japan’s export growth in January is “temporary and exports could continue as final demand overseas is still strong and the inventory cycle suggests there is more demand.”

In related news, yesterday Moody’s Investor Services lowered its outlook on Japan’s sovereign debt to “negative”.

The credit rating agency cited the country’s mounting debt worries for the downgrade. Moody’s currently rates Japan’s Government debt at an Aa2 level.

Japan’s debt currently stands at almost twice the country’s annual economic output and is the highest of any industrialised nation.

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