Japan logs record trade gap in 2012, yen impact yet to show

Thu Jan 24, 2013 12:44am EST
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By Kaori Kaneko and Tetsushi Kajimoto

TOKYO (Reuters) - Japan logged a record annual trade deficit in 2012 as exports extended a slide in December, signaling that Prime Minister Shinzo Abe's efforts to weaken the yen have been slow to gain traction.

A Reuters monthly poll showed Japanese manufacturing sentiment is improving but the 2012 trade gap of 6.93 trillion yen ($78.27 billion) and a seventh consecutive monthly drop in exports show that has yet to translate into hard economic data.

The second consecutive annual trade deficit recorded by a nation that for decades had racked up hefty surpluses, helping to finance its ballooning debt, underlines the need for Abe's government to strike a balance between economic growth and fiscal reform.

The 2011 shortfall was the first annual trade deficit since 1980, as exports struggled and Japan shifted away from nuclear power in favor of fossil fuels after the March 2011 earthquake, tsunami and subsequent nuclear crisis.

The December data, however, is seen as the low point and analysts expect the economy to gradually regain momentum this year. A Reuters poll shows the trade deficit is expected to narrow in the year ending March 2014 to 5.6 trillion yen from 6.2 trillion yen in the year ending March 2013.

"I don't think the shortfall will persist as a trend," said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo.

"As the U.S. and Chinese economies pick up and the yen weakens, Japan's trade balance will return to surplus by around the end of this year."

The data from the Finance ministry on Thursday showed that exports fell 5.8 percent in the year to December, more than economists' consensus forecast of a 4.2 percent drop.   Continued...

A Japanese flag flutters in front of a shipping container area, at a port in Tokyo December 19, 2012. REUTERS/Yuriko Nakao