Japan's exports continued to grow during January

The trade balance fell to a 348.9bn yen ($2.95bn; �1.7bn) deficit in January against surpluses of 911.9bn yen in December and 193.9bn yen a year before.

Announcing the figures, the government said soaring oil prices and revived domestic spending had boosted imports.

The Japanese deficit was the largest since January 1983 and only the third in two decades.

'Temporary deficit'

But analysts and government officials said there were positives to be taken from the figures, as they show strong domestic demand.

The Japanese economy is on the right track Koji Kobayashi, Mizuho Research Institute

Data also showed that exports continue to rise. While imports expanded 27% to 5.36 trillion yen, exports in January also rose strongly, by 13.5% to 5.01 trillion yen.

"We see this as a temporary deficit and expect surpluses to resume from here on," said Daisuke Yamazaki, economist at Goldman Sachs.

A separate set of figures also indicated that Japan's economy is continuing to strengthen, with the index of production activity in all industries rising to its highest level since 1988.

"Aside from the effects of high oil prices, growth in imports in general can be interpreted as a sign that domestic demand is robust, another reason to say the Japanese economy is on the right track," said Koji Kobayashi, senior economist at Mizuho Research Institute.