By Kang Seung-woo
Korea’s trade deficit with Japan reached a record high in the first half of the year due to a surge in imports of industrial components and machinery from the neighboring country.
According to the Bank of Korea (BOK) and the Korea Customs Service Friday, the trade shortfall with Japan reached $18.07 billion in the first six months of 2010 as imports amounted to $30.9 billion, surpassing exports worth $12.83 billion.
It was the first time for the nation’s six-month trade deficit to surpass $18 billion since it started trade with Japan after its liberation from colonial rule in 1945. It was also well above the previous record of $17.13 billion deficit set in the first half of 2008.
The central bank said that after peaking at $17.13 billion in the January-June period of 2008, the deficit began to decline and fell to $12.44 billion in the first half of last year.
Since then, the shortfall turned upward, with its quarterly deficit growing from $7.07 billion in the third quarter of last year to $9.18 billion in the second quarter of this year.
The BOK said that the key culprit behind the snowballing deficit was Korea’s heavy reliance on Japan’s capital goods.
“Korea has mainly imported capital goods from Japan, but the global financial crisis shrank the imports,” said Lee Young-bog, head of balance of payment team at the BOK.
“With the local economy getting back on track, Korean companies have started equipment investment again, which leads to the import of parts, components and manufacturing equipment and translates into a rise in the trade deficit.”
According to the Samsung Economic Research Institute (SERI), there is a correlation between Korea’s overall exports and its imports from Japan, which shows the nation’s dependence on Japanese goods.
The institute said that for one year from the second half of 2009 onward, the nation’s total exports jumped by 33.1 percent, while during the same period, its imports from Japan climbed by 38.6 percent.
Despite the growth in the trade deficit, the portion of Korea’s trade with Japan decreased, as it recorded 10.28 percent in the first half, compared with 10.43 percent in the latter half of 2009.