Tokyo: Japan on Wednesday posted its worst October trade figures in over 30 years, underscoring persistent weakness in the world’s third-largest economy amid the global slowdown and a spat with China.
Hopes that the nation had cemented its recovery following last year’s quake-tsunami disaster are fading fast amid a string of poor economic data, as the European market—a key buyer of Japanese cars and electronics—falls away with only a small uptick in shipments to North America.
A territorial row over islands in the East China Sea claimed by Tokyo and Beijing has also affected the trade balance owing to a consumer boycott for Japanese brands, as China-bound car shipments tumbled 82% last month.
On Wednesday, finance ministry data showed October’s trade deficit nearly doubled to $6.7 billion from a year ago, coming on top of weakening factory output and after Japan’s economy shrank in the latest quarter, nudging it towards recession.
The poor figures have heaped pressure on the Bank of Japan (BoJ) to launch further easing measures to stoke growth, with main opposition leader Shinzo Abe saying he wanted the central bank to buy government bonds.
The BoJ, however, held off fresh policy action and kept rates steady on Tuesday, with its chief Masaaki Shirakawa dismissing the proposals from Abe, tipped to become Japan’s next prime minister in December elections.
But the bank also warned that it expected Japan’s economy to stay “relatively weak for the time being”.
“There remains a high degree of uncertainty,” it added.
October’s trade shortfall came to ¥549 billion , expanding from a year-earlier deficit of ¥283 billion as exports fell 6.5%.
That marked Japan’s worst October trade figures for the month since 1979, when comparable data became available, and the country’s fourth consecutive monthly deficit.
October shipments to China were off 11.6%, as car exports plunged.
Japan’s top three automakers—Toyota, Nissan and Honda—have reported that the row with China has dug into their sales and profits, while major electronics producers have also been sideswiped by fallout from the spat.
“The impact (of the China row) on exports is significant, especially on those of automobiles,” Yoshimasa Maruyama, senior economist at Itochu Corp., told Dow Jones Newswires.
Demand for products that supply China’s public works projects may help exports going forward, but Japan’s post-Fukushima energy bills will cloud the trade picture, said Ayumi Maekawa, senior economist at Mizuho Research Institute.
“China-bound exports will probably pick up but not at a fast pace,” she said.
“As the pace of recovery for exports is likely to be slow while imports of crude oil and gas are stuck at certain levels, the trade deficit will probably continue for several more months.”
Imports in October were down 1.6% from a year ago, but Japan has seen its energy bills soar since shutting its nuclear plants after reactors at the Fukushima Daiichi plant went into into meltdown, spreading radiation over a large area.
Nuclear power once supplied about one-third of Japan’s electricity needs.
Only two of its 50 reactors are currently in operation, with the nation turning to pricey fossil-fuel alternatives to plug the energy gap.
Japan’s economy has been hit by a litany of other problems, including an export-denting strong yen and a fall-off in demand in debt-riddled Europe, with shipments to the European Union falling 20.15 in October.
Exports to the key North American market turned up just 3.4% in October while shipments to Asia—including China, South Korea, Indonesia, Taiwan and India— were down 4.9% as demand slowed in a region that has been a crucial driver of global growth.