• Kyodo


Japan logged its second-biggest trade deficit on record in May as exports continued to fall after the March earthquake and tsunami, government data showed Monday, darkening the outlook for the economy.

But the result, which showed that the decline in exports was slowing, fueled optimism that the nationwide supply-chain disruptions and plunge in industrial output following the March 11 disaster are starting to be addressed.

The trade balance remained in the red for the second straight month with a deficit of ¥853.7 billion, the second-biggest on record after ¥967.9 billion marked in January 2009, when exports plunged amid the global economic downturn ushered in by the collapse of U.S. investment bank Lehman Brothers Holdings Inc. in 2008.

The value of exports dropped 10.3 percent from a year earlier to ¥4.76 trillion for the third straight monthly fall, weighed down by slower production following the natural disaster.

Imports expanded 12.3 percent, the fastest rise since November, to ¥5.61 billion for the 17th consecutive month of increase, due mainly to higher crude oil and other commodity prices. The result also reflects a boost in fuel oil imports as the country seeks alternative energy sources amid the crisis at the tsunami-ravaged Fukushima No. 1 nuclear plant.

The May trade deficit was largely affected by a 38.9 percent fall in exports of vehicles to the United States, Europe and the Middle East, the Finance Ministry said in a preliminary report.

Other products notably losing ground were electronics and auto parts destined for Asia, down 18.5 percent, respectively.

Chief Cabinet Secretary Yukio Edano said the government had expected a sharp deterioration in the nation’s trade balance because of the earthquake. But he also told reporters, “We’ve seen more progress toward a recovery in output than earlier expected and believe the situation will change before too long.”

Some economists echoed the view, pointing out that the pace of fall in exports slowed from 12.4 percent in April.

“May trade figures confirm exports are shifting toward a recovery,” Kohei Okazaki, an economist at Nomura Securities Co., said in his report.

“If the domestic production of vehicles can be restored significantly within June, then we will see a rapid recovery in exports in July and August,” he said.

Analysts say the easing of the supply-chain disruptions is likely to cause a shift in focus to the global economic outlook, as players seek clues to future developments in the Japanese export industry.

Some of them cited downside risks to the world economy, including higher commodity prices and the sovereign debt crisis in Europe.

By destination, exports to China, Japan’s biggest trading partner, fell 8.1 percent to ¥938.2 billion, while imports gained 6.6 percent to ¥1.153 trillion with the balance marking a ¥214.7 billion deficit.

Exports to the United States shed 14.6 percent to ¥645.3 billion, with imports increasing 4.2 percent to ¥541.4 billion. The balance logged a surplus of ¥103.9 billion, down 56.0 percent from the same month a year before.

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