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Trade Deficit Will Prove to Be Good for Japanese Stocks
CNBC.com | February 21, 2012 | 12:48 AM EST

Japan’s trade deficit surged to a record high in January underscoring the grim outlook for the world’s third largest economy. However, equity strategists believe the weak economic data will compel the Bank of Japan to further expand its asset purchase program, offering a boost to the country’s undervalued stocks.

“This trade deficit is a very good thing, it provides a lot of excuses and a lot of reasons for the Bank of Japan and the Ministry of Finance to come in with new policies and different ideas of what they are going to do with the economy,” Glen Wood, Partner & Head of Sales of equity research firm, Ji Asia, told CNBC.

Japan on Monday reported a worse-than-expected trade deficit of 1.475 trillion yen ($18.59 billion), more than 50 percent larger than the previous record of a 967.9 billion yen deficit seen in January 2009 during the midst of the global financial crisis.

Analysts say this a clear call for further stimulus by the BOJ, which unexpectedly expanded its asset purchase program by 10 trillion yen last week as part of efforts to weaken the yen and beat deflation. Since the announcement, the yen has fallen over 2.5 percent against the dollar and continues to hover near multi-month lows against other major currencies.

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