— Adds BOJ Real Export, Import Indexes, Report in Paragraphs 17-21
— Japan 2011 Trade Deficit Y2.49 Trln, 1st Shortfall Since 1980
— Japan Dec Trade Deficit Y205.1 Bln: MNI Median Fcast -Y150.5 Bln
— Japan Dec Exports -8.0% Y/Y, 3rd Drop In Row; MNI Fcast -8.0%
— Japan Dec Imports +8.1% Y/Y, 24th Rise: MNI Median Fcast +7.8%
— Japan Dec Exports To Asia -11.7% Y/Y, 3rd Fall in Row
— Japan Dec Exports To China -16.2% Y/Y, 3rd Fall in Row
— Japan Dec Exports To US +3.9% Y/Y, 2nd Rise in Row
— Japan Dec Exports To EU -12.7% Y/Y, 3rd Fall in Row

TOKYO (MNI) – Japan posted the first trade deficit in over three
decades as the global slowdown and the yen’s rise to record highs
threatened a sustained export-led recovery following the March
earthquake disaster, data from the Ministry of Finance showed Wednesday.

Japan chalked up a trade deficit of Y2.49 trillion last year, the
first shortfall since 1980, when the aftermath of the second oil crisis
pushed up import costs sharply, resulting in a trade deficit worth Y2.6
trillion.

It was the only the third time that Japan has posted a trade
deficit under the current data formula that dates to 1979.

The yen maintained a softer undertone on Wednesday amid speculation
that it may lose its status as a safe-haven currency, quoted at Y77.69
versus the dollar following the release of the data, just shy of Y77.84
on Tuesday, the lowest since Dec. 28, 2011.

In the whole of 2011, Japan’s exports fell 2.7% to Y65.55 trillion,
marking the first fall in two years, following a 24.4% surge in 2010 and
a 33.1% plunge in 2009.

Imports soared 12.0% to Y68.05 trillion in 2011, a second straight
annual gain after a 18.0% increase in 2010 and a 34.8% drop in 2009.

Since the March earthquake that caused the Fukushima nuclear
meltdown, Japan has been buying more oil gas for thermal power plants to
offset the loss of electricity generation capacity caused by the
shutdown of many of Japan’s 54 nuclear reactors.

On the eve of the data release, Bank of Japan Governor Masaaki
Shirakawa downplayed the expected shortfall in 2011, saying it will be
“only temporary” as it has been caused by a sharp rise in fuel imports
and declines in production capacity for exports caused by the March
disaster.

But analysts also warned of a gradual decline in the competitive
edge of Japanese firms in the global markets as Toyota Motor fell from
the position as the world’s largest automaker by sales last year,
outpaced by General Motors and Volkswagen, partly due to the drag from
the supply chain breakdown caused by the earthquake.

Hitachi will end domestic production of flat-screen TVs by
September, hit by intensifying price competition, as Samsung Electronics
has emerged as the global leader in the market which was developed by
Japanese electronics makers, including Hitachi and Sharp.

In December 2011, Japan’s trade deficit, the third consecutive
monthly shortfall and the seventh last year, narrowed to Y205.1 billion
from Y687.6 billion in November.

But the December trade deficit was larger than the median forecast
by economists in a Market News International survey for a deficit of
Y150.5 billion.

Exports fell 8.0% on the year to Y5.62 trillion in December,
marking a third straight month of declines. It matched the median
forecast by economists in a MNI survey for a 8.0% drop.

Exports of semiconductors and other electronic parts, which are
sensitive to changes in the trend of the global economy, fell 13.0% on
year while shipments of plastics dropped 17.3% and those of iron and
steel products dipped 11.4%.

Japanese imports rose 8.1% y/y in December to Y5.83 trillion for
the 24th consecutive rise on continued high demand for crude oil and
liquefied natural gas used for power generation.

In December, imported crude oil prices averaged $114.1 a barrel, up
32.4% on year. The pace of growth slowed from rises of 33.0% in November
and 43.5% in October.

Later on Wednesday, the BOJ said its December real export index
rose a seasonally adjusted 1.1% on the month to 116.2 (100 for the 2005
base year), posting the first gain in three months after -2.7% in
November and -4.6% in October.

The December reading was the highest since 118.2 in October.

Meanwhile, the BOJ’s real import index fell a seasonally adjusted
2.8% m/m to 104.9, posting the second consecutive m/m fall after -1.8%
in November and +4.6% in October.

The BOJ also maintained its cautiously optimistic outlook for
exports and production despite the global slowdown and the strong yen.

“Exports and production are expected to remain more or less flat
for the time being and increase moderately thereafter, mainly reflecting
a pick-up in the pace of recovery in overseas economies,” the BOJ said
in its monthly report for January released on Wednesday.

In December, exports to Asia, the largest market for Japanese
goods, fell 11.7% to Y3.07 trillion, a third straight drop, according to
the MOF’s trade data.

Exports to China declined 16.2% to Y1.08 trillion in December, also
the third consecutive y/y drop.

Hit by flooding in Thailand, Japan’s exports to the key Southeast
Asian production center posted the third straight y/y drop in December,
down 16.6% after falling 24.0% in November. Imports from Thailand fell
20.1% after a 11.9% drop in the previous month.

Exports to the U.S. rose 3.9% to Y1.01 trillion in December for a
second straight y/y rise.

Meantime, exports to the European Union fell 12.7% to Y614.3
billion in December for a third straight year-on-year fall.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4835 **

[TOPICS: M$J$$$,M$A$$$,MAJDS$,MT$$$$]