By Kim Hyun-cheol
Staff Reporter
The nation's trade deficit with Japan has surpassed $10 billion since the turn of this year, raising concerns that the yearly shortfall could hit a record high and that a free trade agreement (FTA) with the neighboring country may also hit snags.
The trade deficit amounted to $10.3 billion from January through April 20, up $1.06 billion from the same period last year, according to a report released by the Ministry of Knowledge Economy. The figure exceeds the combined total of $10 billion in the trade surplus South Korea enjoyed with the European Union and China over the same period.
South Korea's trade balance ended in a $40 million deficit last month, down $390 million from a year earlier.
If the current trend continues, the trade deficit with Japan could reach $40 billion by the end of the year.
The trade deficit with Japan remained at around $10 billion in 2001 before jumping to $14.7 billion in 2002 and $19 billion in 2003.
Exports to Japan maintained a steady increase in the first four months of the year but were overshadowed by ballooning imports, which jumped 28.6 percent in April year-on-year.
The snowballing deficit with Japan is the result of a surge in imports of capital goods such as high-tech machinery parts and semiconductor manufacturing equipment. Imports of steel products also contributed to widening the deficit.
In April, imports of steel products were up 29.2 percent at $633 million and those of precision chemical products soared 33.4 percent to $268 million. Automobile imports also rose 22.7 percent to $53 million.
Exports of precision chemical products and mobile communication devices rose the most in April, by 47.8 percent and 41.2 percent, respectively, while LCD devices and semiconductors saw a drastic fall of 37.4 percent and 11.5 percent.
The year-round trade deficit with Japan has been increasing over the last few years.
The deficit is also likely to have a negative influence on the possible signing of an FTA with Japan.
"Imports from Japan are expected to increase after signing the FTA, so the current deficit will not work in a positive directions in the negotiations,'' a ministry official said.
Earlier, Knowledge Economy Minister Lee Youn-ho raised the possibility of delaying the negotiations.
``Japan is willing to put forward the FTA issue but we need to ease the trade imbalance in the machinery parts business,'' Lee said returning from Japan after accompanying President Lee Myung-bak on his visit there last month.