Record August Trade Deficit in Japan

123jump.com Staff
15 Oct, 2008
New York City

Stocks in Japan rose after South Korean steel maker Posco offered weak outlook for the current quarter. Weakness in the ocean freight index also dragged shipping lines lower. Financials and realty stocks fell on the worries that the U.S. recession will be longer and deeper than anticipated.

[R]5:00AM New York, 7:00PM Tokyo – Japan reported record trade deficit in August. Shipping lines, steelmakers and realty stocks led the decliners in the Nikkei 225 index.[/R]

Japan stock indices traded in positive territory after shrugging negative investor sentiment as the country’s trade deficit widened to a record 236 billion yen in August.

Market Sentiment

In Tokyo trading Nikkei 225 gained 1.06% or 99.9 to 9,547.47, and the broader Topix Index shed 0.1% or 0.79 to 955.51.

In the first section of the Tokyo Stock Exchange 25 billion shares worth 2.3 trillion yen were traded and in the second section 404 million shares valued at 3.4 billion yen changed hands.

Of the Nikkei 225 stocks 117 rose, 103 declined, and 5 were unchanged. Aeon Co. Ltd. led advancers in the index shares with a rise of 10.64% as investors bought domestic-related stocks.

Record Japan Trade Deficit in August

Japan’s Ministry of Finance said today that country’s trade deficit jumped the most since 1985 to a record 236 billion yen in August from 232 billion yen a month ago.

The deficit widened as imports soared by 20.2% to 6.9 trillion yen as crude oil prices increased 61% from a year earlier, while exports dropped by 0.9% to 6.72 trillion yen from 7.29 trillion yen a month ago.

Japan imports all of its crude oil requirements.

The country’s export led economic growth is likely to ground to a halt as demand slows from the U.S., China, and Europe. Exports to the regions contribute to more than 50% of economic growth.

Current account deficit for the month plunged 52.5% to 988 billion yen from 1.5 trillion a month ago.

BoJ to Provide Unlimited Supply of Dollars to Banks

The Bank of Japan after an emergency Monetary Policy Meeting offered financial institutions unlimited dollars at a fixed rate against “pooled collateral” to provide sufficient supplies to the market.

The Bank of Japan action follows the similar move led by the Fed in coordination with six central banks including the ECB and BoE. The move is aimed at improving interbank lending and support flow of credit to consumers and businesses.

Japan is also lowering its minimum fee rates applied to the security lending facility to 0.5% from 1% to shore liquidity in the money markets. In addition, the central bank will be accepting debt obligations guaranteed by the Bank’s counterparty financial institutions as collateral until the end of April 2009.

The measures will complement government plans to stop the sell-off of state-owned shares that the government purchased after 2002, relax company share buy backs rules and regulate short selling.

Gainers & Losers

Aeon Co. Ltd. led advancers in the Nikkei 225 index shares with a rise of 10.64%, in NGK Insulators of 10.48%, in Japan Steel Work of 10.14%, in Toyota Tsusho of 9.16%, and Japan Tobacco of 8.51%.

Takeda Pharmaceuticals advanced 6.22% as a result.

Pioneer Corp. led decliners in the Nikkei 225 index shares with a fall of 10.36% followed by losses in Dowa Holdings of 9.97%, in Nippon Steel of 9.32%, in Mazda Motor of 9.24%, and Mitsubishi Motor Co. of 8.57%.

Nippon Steel slumped 9.3% or 33 yen to 331 yen after South Korea’s biggest steelmaker Posco offered cautious outlook for the current quarter and reported 40% rise in earnings in the third quarter.

Shipping lines declined after the Baltic Dry Index, which measures ocean freight charges for raw materials, slumped 8.5% yesterday on concerns that the global economy will slow.

Kawasaki Kisen plunged 6.83%, Mitsui OSK Lines shed 6.84%, and Nippon Yusen tumbled 6.02%.

Inpex Holdings fell 5.90% after crude oil prices dropped 3.2% to $73.63 per barrel.