Korea’s trade deficit with Japan sharply fell last year as the powerful earthquake and the appreciating yen pushed up the island country’s imports, a report showed Monday.
Korea’s exports to Japan spiked more than 41 percent on-year to $360.3 billion between January and November last year, the report by the Korea International Trade Association showed. Imports rose 7 percent to $624.3 billion.
Korea’s trade deficit with its second-largest partner came in at $264 billion over the 11-month period, down nearly 27 percent from a year ago.
“There was an upsurge in demand for Korean goods from Japanese firms, which were slowly shifting to outsourcing but suddenly faced the double whammy of the earthquake and a strong currency,” Park Ki-im, a senior researcher of the Institute For International Trade, a think tank affiliated with the trade body, said in the report.
Korea has been experiencing a chronic trade deficit with the neighbor country as it brings in the large chunk of its key industrial parts, which account for 78.5 percent of total.
But the latest decline resulted from the March earthquake and tsunami that brought a series of plant operations to a halt, boosting orders for Korean components and machinery instead.
The Japanese currency also gave impetus to Korean products. Despite frequent efforts by the Bank of Japan to rein in its appreciation, the yen has gained nearly 15 percent in three years. It was trading at about 76 yen against the U.S. dollar Monday afternoon.
Among Korea’s key items were petrochemical products, whose export volume shot up more than 130 percent on-year during the 11-month period. Korea’s trade surplus in the segment reached $6.5 billion.
The downward trend, however, will slow this year, Park noted. But Korea will likely see robust demand for power generation equipment, auto parts and food, fashion and beauty products as Japan strives to get back on its feet.
“Korea will need to focus on boosting exports this year, rather than curbing imports to hold back deficit growth,” he said.
By Shin Hyon-hee (email@example.com