Page last updated at 09:52 GMT, Thursday, 25 September 2008 10:52 UK

Japan posts a rare trade deficit

Japanese car production line
Falling demand for Japanese cars weighed on exports

Japan's trade gap slipped into the red in August as oil imports surged but exports fell, official figures show.

Excluding January - when exports usually slow in the New Year holidays - it was the country's first trade deficit since November 1982.

Imports outpaced exports by 324bn yen ($3.09bn; 1.65bn) in August.

The news has heightened fears Japan may be on the brink of recession as it comes hot on the heels of a sharp contraction in economic growth.

Figures released earlier this month showed economic output shrank at an annualised rate of 3% between April and June - its sharpest fall in almost seven years - as a result of falling exports and domestic demand.

Price pressures

The latest trade gap figures showed the resource-poor country was hit heavily by surging raw material costs.

The data really showed that economic conditions both in Japan and overseas are weakening
Satoru Ogasawara, strategist, Credit Suisse

Rising prices of oil, coal and natural gas drove import costs 17.3% higher to 7.38 trillion yen. Import costs for coal alone jumped 121% and petroleum products by 64%.

By contrast, exports grew just 0.3% to 7.56 trillion yen - mainly as a result of falling automobile shipments.

A record 21% drop in exports to the US, blamed on the current financial crisis, did little to ease fears about a looming downturn in Japan.


"The data really showed that economic conditions both in Japan and overseas are weakening," Credit Suisse strategist Satoru Ogasawara said.

"Demand from not only the United States but also Europe and Asia has been faltering, and it is likely to continue at least until the end of this fiscal year."

Meanwhile, companies at home have been battling low domestic demand.

Looking ahead, economists believe the news does not bode well for the Tankan report, due out next week.

The closely-watched survey of business conditions is expected to "underscore that the economy is in a recession", said JP Morgan Securities economist Masamichi Adachi.

A country is generally considered to be in recession when it sees two consecutive quarters of declining economic output.

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