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Japan reports annual trade deficit


Japan has announced its first annual trade deficit since 1980

Japan has announced its first annual trade deficit since 1980

Japan has announced its first annual trade deficit since 1980

Japan reported its first annual trade deficit since 1980 as it imported expensive energy to offset shortfalls caused by the devastating tsunami and manufacturers shifted production overseas to avoid the damage inflicted by the strong yen.

The 2.49 trillion yen (32 billion US dollars) deficit for 2011 reflects a 2.7% decline in the value of Japan's exports to 65.55 trillion yen (843 billion US dollars).

In December, the trade balance was a deficit of 205.1 billion yen, according to the Ministry of Finance figures.

"It reflects fundamental changes in Japan's economy, particularly among manufacturers," said Hideki Matsumura, senior economist at Japan Research Institute. "Japan is losing its competitiveness to produce domestically."

"It's got difficult for manufacturers to export, so they're they've moved production abroad so that products sold outside the country are made outside the country," he said.

The yen's surge to record levels against the dollar has made Japanese exports more expensive and also erodes the value of foreign earned income when brought home.

Currency levels have forced manufacturers including Nissan Motor and Panasonic to shift some of their output to factories overseas.

At the same time, Japan is facing intense competition from South Korea, Taiwan and Singapore, where labour and production costs are cheaper.

Japanese manufacturers have been battered by a host of negatives in the past year.

The tsunami temporarily disrupted the production of carmakers and other manufacturers. Weakness in the US economy and Europe's debt problems and recent flooding in Thailand, where many Japanese carmakers have assembly lines, also contributed to export declines.