Japan's trade nearly halved in February with exports falling nearly 50 per cent and exports declining 43 per cent, setting the world's second largest economy on course for another sharp contraction, the worst since World War II.
Japan's exports plunged 49.4 per cent in February this year, compared to the exports in February 2008, surpassing January 2009 slump of 45.7 per cent, the finance ministry said in a report.
Imports fell 43 per cent, against an expected 38.5 per cent, due largely to falls in oil prices, bringing Japan's trade balance to a surplus of 82.4 billion yen ($841.6 million) against a 10.9 billion yen deficit forecast earlier.
For the first time in five months Japan's trade balance swung into surplus in February as a sharp fall in imports offset a record fall in exports for the month, government data showed.
The trade surplus comes after Japan posted its largest trade deficit ever in January.
Japanese economy, which is heavily dependent on exports, is among the worst hit as the global downturn pummels demand for cars and high-tech goods, Japan's main exports.
Analysts see no immediate prospect of a turnaround for the Japanese economy in the absence of an easing of the global financial crisis. Any recovery in Japan's trade would depend on a pick-up in US and Chinese demand, they point out.
Japan's exports to the United States and Europe more than halved while import demand from China dropped almost 40 per cent.
Japan's trade surplus plunged 91.2 per cent in February from a year earlier to 82.35 billion yen ($840 million). While this is an improvement from the previous month, the fall in trade deficit may be attributed to a fall in Japan's imports.
Japan's imports are down 43 per cent in the year to February and the slump in demand seems to have hit Australian exports most. Japan is Australia's biggest export market.
Japan's economy seems to be hurtling down towards another bout of deflation after logging the worst performance in almost 35 years in the last quarter of 2008, contracting at an annualised pace of 12.1 per cent.
Masaaki Shirakawa, governor of the bank of Japan, however, does not expect Japan to slip into another deflationary spiral. The economy may be facing a further downturn "and prices will likely soon start falling. But right now, the country is not going through a vicious cycle where economic contraction and price falls reinforce each other," media reports quoted him as saying.
The corporate sector was a key driver of Japan's economic recovery following the 1990s recession and the current contraction has forced corporate giants like Toyota and Sony to slash thousands of jobs as they fall deeper into the red.
Analysts expect the Japanese economy to shrink at a slightly faster pace in the current quarter and to remain weak for some time to come.