Sunday, March 8, 2009

Japan Posts First Current-Account Deficit Since 1996 on Exports

By Keiko Ujikane

March 9 (Bloomberg) -- Japan had its first current-account deficit in 13 years in January as the global recession sapped demand for exports.

The deficit stood at 172.8 billion yen ($1.76 billion), the Ministry of Finance said in Tokyo today. The median estimate of 22 economists surveyed by Bloomberg News was for a gap of 15.3 billion yen. It was the first shortfall since January 1996.

The global slump is eroding earnings at companies from Toyota Motor Corp. to Sharp Corp., prompting them to fire workers and cut production. A government report last week showed Japanese companies cut spending last quarter at the fastest pace in a decade and profits plunged, pushing the nation’s economy toward the worst postwar recession.

“Export declines are accelerating and we could see a current-account deficit continue through the third quarter,” said Kyohei Morita, chief Japan economist at Barclays Capital in Tokyo.

Shipments to the U.S. tumbled an unprecedented 52.9 percent in January from a year earlier, and shipments to Asia and Europe also posted the largest-ever declines, according to a separate trade report released last month. Today’s trade figures don’t include regional breakdowns.

The yen’s 23 percent gain against the dollar in 2008 eroded the value of exporters’ overseas sales, exacerbating losses at companies including Toyota and Sharp.

Toyota is expecting its first annual loss in 59 years as vehicle sales plunge in the U.S., Japan and Europe, its biggest markets. Every 1 yen gain against the dollar cuts Toyota’s annual operating profit by 40 billion yen.

Sharp, the country’s largest maker of liquid-crystal- display televisions, will post its first loss in more than five decades and cut 1,500 temporary jobs because of falling sales.

Bank of Japan Governor Masaaki Shirakawa last week said the economy is worsening faster than the central bank expected and the policy board will keep looking for ways to counter the slump.

The current account tracks the flow of goods, services and investment income between Japan and its trading partners. It includes trade not shown in the customs-cleared balance.

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