Trade deficit with Japan

Time to rectify chronic export-import imbalance with Japan

Korea's trade deficit with Japan is improving at a rapid pace. The nation's trade shortfall with the neighboring country in the first 10 months of the year stood at $16.36 billion, down 20.6 percent from last year, according to the Ministry of Trade, Industry and Energy, Monday. This is Seoul's lowest trade deficit with Tokyo for the January-October period since 2003 when the 10-month red ink stood at $15.57 billion.

The bilateral trade shortfall swelled to $36.1 billion in 2010 but is expected to hover below $20 billion this year. If the falling trend continues, hopes are rising that Korea may begin to get out of its chronic trade imbalance with Japan. The rapidly decreasing deficit comes as imports fell much faster than exports. In the first 10 months, exports dropped 6.5 percent year-on-year while imports plunged 12.8 percent.

The steeper fall of imports resulted from the slumping semiconductor and petrochemical sectors, adversely affected by the global economic slowdown. Another factor was Koreans' boycott of Japanese consumer goods, such as cars, garments, alcoholic beverages and home electronic appliances.

The "don't buy Japan" drive was sparked by Tokyo's restrictions on its exports of vital industrial materials for political reasons. The Japanese government might not have expected the boycott would continue for so long and as intensively as now. The Abe administration has ended up shooting itself in the foot. Ever since the nation began to compile trade statistics in 1965, it has been in the red with Japan every year with the cumulative shortfall reaching $620 billion. In short, Korea gleaned trade surpluses with the U.S. and China, but used much of them making up for losses with Japan.

All this is due to Korea's undue reliance on materials, parts and equipment from Japan. That reaffirms why the nation should go all out to localize the three sectors. If localization is difficult anytime soon, the second-best option is to diversify supply sources. Attaining industrial and technological self-reliance is a national task, particularly in the face of Japan's economic retaliation over historical issues. For the same reason, the National Assembly ought to pass related bills as soon as possible.