Japan posts record fiscal-year trade deficit

Japan on Thursday posted a record trade deficit for the 2011 fiscal year with car and electronics exports tumbling, while energy imports soared in the wake of the Fukushima nuclear crisis.

The 2011 fiscal-year deficit hit 4.410 trillion yen ($54.2 billion), according to the finance ministry, the worst figure on record amid continuing worries about the world's third largest economy.

For decades, Japan enjoyed huge trade surpluses owing to its competitive cars, electronics and other exports.

But the country is resource-poor and demand for fossil fuels has surged after last year's quake-tsunami disaster sparked the world's worst nuclear accident in a generation, leading the government to take many atomic reactors offline.

At the same time demand in the country's key European market suffered as the eurozone debt crisis took hold.

For the year ended March, Japanese exports fell 3.7 percent to 65.282 trillion yen while imports soared 11.6 percent to 69.692 trillion yen, as worries mount that Japan will face energy shortages this summer.

All but one of its nuclear reactors have been shut down following the disaster.

Exports of electronic components fell 14.7 percent, followed by a 5.4 percent fall in vehicle shipments, with last year's natural disasters disrupting manufacturers' supply chains and hampering exports.

In the same period, crude oil imports rose 21.9 percent while liquefied natural gas orders shot up 52.2 percent.

The latest figures show Japan's first fiscal-year deficit since a shortfall of 764.8 billion yen in 2008 after exports plunged as the global financial crisis kicked in with the collapse of Wall Street giant Lehman Brothers.

"At the time of the Lehman shock, foreign demand was just gone, dealing a blow to exports," said Satoshi Osanai, economist at Daiwa Institute of Research.

"This time around, however, the deficit largely stemmed from higher import costs of natural resources," he added.

Energy costs will likely continue to take a toll on the trade picture, but "deficits are expected to shrink as exports recover gradually," Osanai said.

Trade with China and other emerging economies was likely to pick up, while solid demand from the United States will also provide support as the world's biggest economy mounts a recovery, he argued.

The European market, however, remained a concern, with shipments of Japanese cars and other products slipping.

"The European debt crisis has calmed down but their economy is still sluggish. We should keep a cautious view toward Europe," Osanai said.

The ministry data released Thursday also showed that Japan posted a smaller-than-expected trade deficit of 82.6 billion yen in March, well below economists' expectations for a deficit above 200.0 billion yen.

Exports to the European Union still fell 9.7 percent while US-bound exports jumped 23.9 percent.

A finance ministry official warned that the strong yen was still weighing on exports as the strong currency makes Japanese products more expensive overseas.

The yen rose to its highest level since World War II against the dollar in fiscal 2011, hitting 75.32 in October. It has since weakened to trade at the 81.50 level against the greenback on Thursday.

Analysts expressed little optimism over the smaller-than-forecast monthly trade shortfall, which came after Japan posted a surprise surplus in February.

The data "have yet to show confidence in a trend that (Japan's exports) are clearly emerging from sluggishness," SMBC Nikko Securities chief market economist Mari Iwashita told Dow Jones Newswires.