Export-Oriented Japan Posts First Annual Trade Deficit In 31 Years

By: EW News Desk Team   Date: 25 January 2012

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25 January 2012

The Japanese Finance Ministry has announced the nation’s first-ever annual trade deficit since 1980, after the March tsunami-earthquake disaster and the strong value of the yen last year saw a massive upswing in Japan’s energy imports while exports took a major hit.

In total, Japan’s annual trade deficit for 2011 was 2.49 trillion yen ($32 billion), said a report by the finance ministry, with imports up by 12.0 percent from 2010 while exports fell by 2.7 percent.

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Fossil fuel imports in particular grew significantly due to the energy shortfall caused by the Fukushima disaster with crude oil imports jumping 21.3 percent by value, Liquefied Natural Gas (LNG) up by 37.5 percent and petroleum products up by 39.5 percent.

In addition, the disaster also wrecked much of Japan’s manufacturing supply chains, with traditionally key industries such as the automobile and electronic industries suffering a 10.6 percent and 14.2 percent decline in exports respectively.

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According to some economists cited by Reuters, Japanese trade is likely to remain in deficit for the next few years as the nation attempts to deal with the ramifications from the Fukushima disaster.

The gloomy outlook surrounding the global economy, particularly in Europe, will also hurt demand for Japanese exports – a problem that will only be compounded by the rising value of the yen as global investors flock to the currency as a relatively safe haven.

Still most economists expect Japanese trade to eventually return to a surplus, though long-term trends suggest the surplus will be weaker as compared to previous years.

"Japan can continue to export goods, but if you focus exclusively on the trade balance, then the days as an exporter are ending," said Seiji Adachi, a senior economist at Deutsche Securities, to Reuters.

Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co, added that Japan’s energy needs could be the “wild card” in whether the country would maintain a trade deficit or return to a surplus.

"What we really need is some type of revolution to make ourselves more energy efficient. In that sense, you could say the government's energy policy is contributing to all of this."

Related: Asia’s Wake-Up Call – Is The Export-Oriented Model Dead? : Stephen S. Roach

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The trade deficit could peak out at 5 trillion yen in 2015 due to expensive energy imports, Muto predicted.


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