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Japan Runs Trade Deficit for Fifth Month

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12/19/2012 | 01:35am CEST

-- Japan posts Y953.4 billion trade deficit in November

-- Exports to China down at sharpest rate since January

-- Trade deficits likely to continue, put pressure on officials to act

TOKYO--Japan's trade gap sharply widened in November on accelerating declines in China-bound exports amid a protracted territorial dispute, likely piling pressure on Tokyo's newly elected leaders to act to stimulate the recession-hit economy.

The balance of trade in goods came to a 953.4 billion yen ($11.29 billion) deficit during November, up 37.9% from a year earlier and marking the fifth straight monthly shortfall, Ministry of Finance data showed Wednesday. It was slightly better than economists' forecast.

The continued trade weakness suggests that Japan's expected recovery next year from the ongoing recession may be mild at best.

"It will take a while for the trade balance to improve," said Hideki Matsumura, senior economist at The Japan Research Institute.

Exports to Asia and a debt-crisis-battered Europe are falling, while those to China are "especially weak" amid the dispute over contested islands in the East China Sea, Mr. Matsumura said.

The five-month shortfall represents the longest run of monthly deficit since 1980, when a global oil crisis pushed higher Japan's import bill. Fueling the trend were weak exports and Japan's increased foreign-energy imports to compensate for the shutdown of domestic nuclear reactors.

Long dominant in the global export market for cars and electronics, Japan surprised some analysts last year when it registered its first annual trade deficit since 1980. Having already logged a trade shortfall worth more than Y6 trillion between this January and November, Japan is certain to log a record yearly deficit this year, analysts say. The previous record in the data, which date back to 1979, was a Y2.613 trillion gap in 1980.

While Japan's trade picture may remain grim, it won't necessarily worsen in the coming months, some analysts said. The global economy is gradually improving on the back of recovering U.S. and Chinese economies, and the yen's value relative to other currencies has begun falling to the benefit of Japan's exporters.

Still, the deficit trend is here to stay, which could put pressure on incoming Japanese prime minister Shinzo Abe to boost government stimulus spending and press the Bank of Japan to escalate monetary easing, said Toshihiro Nagahama, chief economist at Dai-Ichi Life Research Institute.

"He can't afford any policy failure to bolster growth," especially if his Liberal Democratic Party intends to follow up on its previous agreement with other parties to start raising the sales tax in 2014, Mr. Nagahama said.

How Mr. Abe's hawkish attitude toward China plays out is also being scrutinized by analysts.

In November, Japanese exports to China dropped 14.5% on year, the worst since January's 20.2% fall, reflecting a bilateral spat over contested islands in the East China Sea.

Overall exports fell 4.1% on year in November to Y4.984 trillion, the data showed, marking the sixth consecutive month of decline.

Write to Takashi Nakamichi at takashi.nakamichi@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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