Japanese export machine falters, recession deepens

TOKYO (AFP) - Prospects for Japan’s export-driven economy turned gloomier on Monday on news that worldwide demand for Japanese goods dried up in January, sending the Tokyo stock market to a 26-year low point.
The Nikkei stock index, which already has shed 20 percent of its value this year, plunged 1.21 percent to 7,086.03, its lowest reading since October 6, 1982.
Share prices elsewhere in Asia also fell sharply after Japan announced its first current account deficit for more than a decade.
The Kong Kong market shed 4.8 percent, Shanghai fell 3.39 percent and in Singapore shares gave up 3.71 percent to close at a six-year low.
Renewed concern over prospects for a capital-raising operation by British banking titan HSBC, and a report from the Asian Development Bank that Asian financial assets lost 9.6 trillion dollars last year, further dampened sentiment.
Stock markets in Europe were meanwhile bucking the trend in early deals, with prices rising in London, Paris and Frankfurt.
Japan, currently deep in recession, has been hammered by a global drop in demand for the cars, high-tech goods and machinery for which it is famous, putting the economy on course for its worst economic crisis since World War II.
Japan logged a bigger than expected deficit of 172.8 billion yen (1.8 billion dollars) in January in its current account, the broadest measure of trade in goods and services, according to official data.
Exports almost halved from the level a year earlier, reflecting a rapidly worsening global economic climate, notably in the United States.
The deficit was the largest since comparable records began in January 1985 and marked a dramatic turnaround from the surplus of 1.164 trillion yen a year earlier. The figure was “shocking,” Toshihiro Nagahama, a senior economist at Dai-ichi Life Research Institute, told Dow Jones Newswires.
“I’m afraid that Japan’s current account will likely be in the red ink for months ahead. Because we can’t expect that the US economy will hit a trough in the near term, Japan’s exports will very likely remain very weak,” he said.
Historically, Japan has run a large surplus in its current account thanks to brisk foreign demand.
But the global crisis has prompted US and European consumers to tighten their purse-strings, forcing Japanese companies such as Toyota and Sony to launch a wave of job cuts.