TOKYO: Japan posted a bigger-than-expected trade deficit in May with exports hit as the impact of the March earthquake and tsunami took its toll on the world's third-largest economy, data showed Monday.
Japan logged a deficit of 853.7 billion yen (US$10.7 billion) in its trade with the rest of the world, the second biggest monthly deficit since 1979 and the biggest shortfall for two-and-a-half years.
The average market forecast was for a deficit of 744 billion yen.
Exports in May tumbled 10.3 per cent from a year earlier to 4.76 trillion yen for the third straight month of declines, with shipments of automobiles plunging 38.9 per cent and electronic components falling 18.5 per cent.
Imports rose 12.3 per cent to 5.61 trillion yen following the March 11 disasters to chalk up a year-on-year rise for the 17th consecutive month due to higher costs of oil and gas.
"Given the enormity of the disaster, the current situation is within the realm of expectations," Chief Cabinet Secretary Yukio Edano said at a press conference.
"Production is recovering faster than expected due to the efforts of individual companies, and I believe the situation will change in the not-so-distant future," Edano said.
Auto exports suffered a steep decline, said Hiroshi Watanabe, economist at Daiwa Institute of Research, but the drop of nearly 40 per cent was an improvement on April's fall of nearly 70 per cent.
This illustrated the pace of recovery after power shortages and supply woes forced the likes of Toyota and Honda to shutter factories, he said. "The deficit will shrink in the summer or later."
Takuji Aida, senior economist at UBS Securities Japan, also said the supply issues were easing and exports should recover from June.
"The export falls have already bottomed, and that means the trade deficit also likely won't get any worse," he told Dow Jones Newswires.
The nation's biggest recorded earthquake and the tsunami it generated on March 11 left more than 23,000 dead or missing, wiped out entire towns along the northeast coast and crippled a nuclear power plant, leading to meltdowns and radiation leaks.
Subsequent power shortages and a supply crunch forced Japan's biggest companies to shut factories, leading to massive production disruption.
The economy was pushed back into recession, contracting an annualised 3.5 percent in the January-March quarter at its sharpest pace since a record 18.0 percent tumble in January-March 2009.
Economists expect it to return to growth in the second half of the year amid reconstruction spending but signs of overseas economic weakness and the ongoing nuclear crisis remain concerns, said Watanabe.
Opposition from local authorities to restarting reactors suspended for regular check-ups would boost Japan's reliance on thermal power generation, he said.
"Imports of gas and oil may grow larger than we expect now, raising the possibility that the state (of Japan's being in the red) will drag on even though the size of deficit shrinks," Watanabe said.
Japan's trade balance was negative for a second consecutive month with the May deficit, which reversed a year-before surplus of 309.1 billion yen.
With its biggest trade partner China, Japan ran a deficit of 214.7 billion yen, more than triple the year-before deficit of 60.5 billion yen.
Japan's trade surplus with the United States fell 56.0 per cent, and that with the European Union dived 77.1 per cent.
- AFP/cc
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