Wednesday May 13, 07:22 AM
Japan: current account surplus suffers record drop
By Miwa Suzuki
TOKYO (AFP) - Japan's current account surplus halved in the year to March, the steepest fall on record, as demand for cars, televisions and other goods slumped amid the worst recession in decades, data showed Wednesday.
The grim figures underline the huge damage that the global downturn has inflicted on the world's second largest economy, which has long relied on foreign markets to power its growth.
The surplus in the current account, the broadest measure of trade in goods and services, fell 50.2 percent in the last fiscal year to 12.23 trillion yen (127 billion dollars), the fastest drop since comparable records began in 1985.
Historically, Japan has run a large current account surplus thanks to brisk exports of cars, electronics and other goods.
But demand evaporated as a financial crisis deepened following the collapse in September of Wall Street giant Lehman Brothers (NYSE: LEH - news) , sending the global economy into a severe slump that curbed worldwide trade flows.
"Exports plunged as demand shrank. A credit crunch accelerated the drop in demand for cars and other goods," said Hiroshi Watanabe, an economist at Daiwa Institute of Research.
The trade surplus nosedived 90.0 percent to 1.17 trillion yen in the year to March as exports slid 16.3 percent and imports fell 3.9 percent.
Japan's auto and high-tech giants have announced massive job cuts in recent months as they sink deep into the red due to the slump in exports.
Japan's heavy dependence on foreign demand to drive its economy left it vulnerable to the current slowdown, which has crushed demand for its key exports such as cars, high-tech goods and machinery.
Japan's economy suffered a brutal annual contraction of 12.1 percent in the last three months of 2008, putting it on course for its deepest recession since World War II. Analysts say this year's first quarter may have been even worse.
In March the current account surplus fell 48.8 percent from a year earlier to 1.49 trillion yen, marking a 13th straight deterioration.
The trade surplus plunged 89.3 percent to 132.9 billion yen as exports fell 46.5 percent, outpacing a 37.8 percent decline in imports.
Exports have shown signs of reaching a bottom, said Watanabe.
"This means the surplus will show smaller drops in the next few months but I don't expect exports to post sustainable growth soon," he said.
"Japanese exports of raw materials and other commodities are benefitting from China's economic measures but the mainstay of Japanese exports is durable goods such as cars and electrical machinery."
Japanese exports will only start to recover meaningfully when the US and European economies bounce back, he said.
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