Japan's trade deficit worsens as exports suffer record fall

Japan's trade deficit worsens as exports suffer record fall

By Mure Dickie in Tokyo

Published: December 23 2008 02:00

Japans export has decreased due to the shockwave caused by the economic crisis. As demand for output falls the prospects for the world’s second largest economy are diming. Japans Cabinet Office announced that the economy would continue to worsen and slow down trade; drop corporate profits cause rising unemployment and weaken private consumption. Governor of the central Bank declared that exports would decrease, partly due to the rise of the Yen and private demand.

The rising Yen is key to the decrease in exports. Import is also falling leaving Japan with a trade deficit for the first time in 28 years. According to officials the fall in export was the steepest ever; even trade with the Middle East and Europe has decreased drastically due to universal falls in demand.

Japan is looking to China for rescue again, but export in China has fallen as well which highlights the failure of Asia’s biggest emerging market. Domestic demand is low and not balancing out the loss from decrease in exports.

To some economist who felt Japans structural surplus lead to the financial crisis Japans trade deficit may be comforting. However the falling imports in Japan exclude them from driving a global recovery.