Trade Gap Hits Record Asian Economic Turmoil Blamed For Sharp Drop In U.S. Exports

America’s trade deficit in goods hit a record high as the Asian economic turmoil struck U.S. exporters full force, prompting blunt talk from a Clinton administration about the urgency for Japan to do more.

The Commerce Department reported that the overall deficit climbed 10.5 percent in January to $12 billion. It was the worst showing for trade in goods and services in a decade, and the imbalance in goods alone - $18.8 billion - was the worst for any month ever.

The healthy U.S. economy is expected to provide markets to help Asia recover. But the administration has begun increasingly to worry that unless Japan, with the world’s second-largest economy, does more to break out of its own lengthy slump, a skyrocketing American trade deficit will cause a political backlash.

Briefing reporters on Thursday’s trade figures, Commerce Secretary William Daley used blunt language to stress that Japan needs to deregulate its economy and stimulate domestic demand through bigger tax cuts and government spending programs.

“If the Japanese economy doesn’t get moving and in addition open its market to more Asian goods, the likelihood of these other economies in Asia recovering on a fast track is rather slim,” Daley said.

Speaking specifically about the huge U.S.-Japan deficit, Daley said, “We still face a weak yen, a stagnant Japanese economy and significant trade barriers.”

Both Daley and Treasury Secretary Robert Rubin, in a separate appearance, suggested it would be helpful if the Japanese yen strengthened in relation to the dollar as a way of controlling the trade gap.

The comments, coming from an administration that has in the past refused to talk down the dollar as a way to gain trade advantages, underscored a growing sense of frustration about Japan’s lack of action.

While the deficit with Japan actually shrank a bit in January to $4.4 billion, it remains higher than a year ago. The deficit with China soared 10 percent to $4.2 billion, and the imbalance with all Pacific Rim countries rose to $11.7 billion, 23 percent higher than January 1997.

In a separate report Thursday, the Labor Department said plummeting energy prices held consumer inflation to a tiny 0.1 percent in February. So far this year, consumer inflation is running at an unbelievably low annual rate of 0.4 percent.

The big rise in the January trade deficit came as imports of goods and services dipped by 1 percent to $89.3 billion and exports fell even more, by 2.6 percent, to $77.3 billion.