JAPAN EXPERIENCED its first annual trade deficit in nearly three decades in the year to March.

The development highlighted the rolling impact of the global fiscal crisis on the world’s second-largest economy. However, the relentless slide in Japanese exports eased moderately last month, providing a glimmer of hope that the severe impact of the global recession may be beginning to abate.

Economists said it was too soon to call the bottom in the economic collapse that caused gross domestic product to contract by 12.1 per cent in the last three months of last year, the largest quarterly drop since 1974.

However, some said the global financial shock appeared to be easing. “The stage is set for a strong rebound in industrial production and exports [in the current quarter],” said Richard Jerram, chief economist at Macquarie Securities in Tokyo.

Mr Jerram said Japanese companies could move “from the vicious cycle of the past several months to some form of virtuous cycle” as they stepped up production to meet demand after cutting back and slashing inventories faster than the dip in demand.

He warned that the resulting improvement in production would still leave Japanese industry “a long way below where [it was] before the world collapsed in September”.

Japan reported a trade deficit of Y725.3 billion (€5.7 billion) in the year to the end of March, the government said, marking its first full-year negative trade balance since 1980.

The deficit reflects the sharp rise in commodity prices earlier in the year and the severe contraction in exports, which has lasted for six consecutive months.

Exports remained weak in March, falling by 45.6 per cent against March 2008, according to the finance ministry. That was an improvement over a record 49.4 per cent dip in February.

Imports fell less than exports, resulting in a trade surplus of Y11 billion for the month, which was 99 per cent down from a year earlier. More reassuringly, exports in March rose 2.2 per cent from February – (Copyright The Financial Times 2009)