World financial news

Japan logged a trade deficit for the longest period in nearly 30 years in November as a global economic slump and a surging yen led to a record fall in exports, tearing into earnings at big companies such as Toyota.

With shipments to the United States and China wilting, the mood among Japan’s export-reliant manufacturers hit an all-time low and deteriorated at the fastest pace on record in December, a Reuters poll showed on Monday.

Underscoring the deepening gloom, Toyota Motor Corp (), the world’s biggest automaker, on Monday forecast its first ever group operating loss due to a relentless global slide in car sales and a crippling rise in the yen.

“Exports will probably be weak at least until the end of this fiscal year,” said Maiko Noguchi, senior economist at Daiwa Securities SMBC.

“After that, there will be some help from fiscal spending (by other countries) but it’s still not clear the economy could recover sustainably.”

A record 26.7 percent plunge in exports, bigger than a 14.4 percent fall in imports, pushed Japan’s once politically sensitive trade balance into a deficit of 223.4 billion yen ($2.48 billion) in November.

That was smaller than a median market forecast of 257.5 billion yen but the second straight month in the red.

Japan last recorded a trade deficit for two months in a row in 1980, when it was locked in a trade dispute with the United States and its currency appreciated to 200 yen to the dollar from more than 300 yen in the 1970s health insurance quotes.

The Bank of Japan cut interest rates to 0.1 percent last week. Mounting trouble in the world’s second-largest economy has strengthened expectations that the BOJ might return to a quantitative easing policy of flooding markets with excess cash dropped just two years ago, a Reuters poll showed.

BOJ Governor Masaaki Shirakawa said on Monday that with Japanese rates already low, the key issue for monetary policy would be how to facilitate corporate funding by making money more easily available at a lower cost.

“The world economy is in a very severe condition it has not experienced for a long time, I’d even say, a crisis. Extinguishing the fire from the crisis is our priority for now and we are doing all we can,” Shirakawa said in a speech to business leaders.

U.S., ASIAN DEMAND SLUMPS

The yen has surged around 20 percent against the dollar this year as investors, spooked by the global financial crisis, bailed out of risky assets and brought funds home.

The deepening economic gloom at home and abroad is triggering output cuts by major Japanese companies such as Toyota, which slashed its annual profit forecasts in its second profit warning in less than seven weeks.

Automakers around the world face the toughest business environment in recent memory, caught in a sharp reversal of demand as credit dries up and consumers close their wallets. 

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