Tokyo: Japanese exports marked their biggest decline in seven years in October, causing the country to post its second trade deficit in three months, adding to the grim outlook for the world’s second-largest economy.
The trade deficit, a rarity for Japan, follows confirmation earlier this week that the nation had slipped into recession and comes as a slew of major manufacturers, hit by waning global demand, announce production cuts.
“This deteriorates the outlook even more _ what’s driving the economy is exports,” said Martin Schulz, an economist at the Fujitsu Research Institute.
Exports plunged 7.7% in October from a year earlier, the biggest drop since 2001, according to government figures released Thursday.
Autos and electronics - two pillars of the economy - are getting hit, the figures show. Automobile exports fell 15% while those of electronic products sank 10.6%. Exports dropped sharply to the U.S. and Europe, where the 15-country euro-zone is also in a recession.
With scarce natural resources, Japan must purchase many necessities abroad - it is the world’s largest importer of food and imports nearly all of its oil. While imports are down from recent months as oil prices eased, they were still 7.4% higher than a year earlier.
The combination of falling exports and a rise in imports led to a 63.9 billion yen ($666 million) deficit for the month. Japan also posted a deficit in August, but before that had not had one in 26 years - except for the month of January, when trade deficits are more common because of the slowdown for the New Year holidays.
As the global economy dramatically slows, many of Japan’s big-name exporters are scaling back production. Isuzu said Thursday it would cut 1,400 contract workers as it lowers its truck output for this fiscal year, after production cuts by Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co.
Electronics makers such as Sharp Corp. are also mulling production cuts in mainline products like LCD TVs as sales cool abroad.
Schulz said there is more bad news on the way, in the form of income from Japanese products that are manufactured overseas. Exports represent only products that are made in Japan and sold overseas.
“Exports are just half of the problem,” he said, adding that income from goods made abroad would be hit by the double-whammy of falling consumer demand and a stronger yen, which erodes foreign earnings when brought home.
Exports in October totaled 6.93 trillion yen ($72.2 billion), while imports came to 6.99 trillion yen ($72.8 billion).
In August, Japan posted a 332.1 billion yen deficit, which swung to an 88.5 billion yen surplus in September.
Shares in Tokyo fell Thursday following a big retreat overnight on Wall Street amid worries about a protracted recession the U.S - a huge export market for Japan. The benchmark Nikkei 225 stock index fell nearly 7% to 7,703.04.