Japan economy still feels the downslide of Fukushima

Japan economy still feels the downslide of Fukushima


By Emre Tunç Sakaoğlu

Japan’s trade deficit has quadrupled reaching a year-on-year level of ¥13.75 trillion ($134 billion) since the beginning of the previous
financial year which ended on 31 March 2013. While Japanese imports increased 17.3% in the meantime up to ¥84.6 trillion ($825 billion), Japanese exports only increased by 10.8% up to ¥70.8 trillion ($690.5 billion). According to data provided by the Ministry of Finance with respect to March 2014, Japan’s trade deficit has lately reached the
monthly level of ¥1.45 trillion ($14.1 billion).
Japan’s trade balance has been facing continuous shortfall for the 21st month in a row. Indeed, the trade deficit, which today accounts
for ¥13.75 trillion (or $134 billion), marks a record high in the economic history for modern Japan. The big picture looks all the more
depressing considering that between 1963 and 2011, Japan had only trade surpluses and no trade deficits at all on a yearly basis.
The main reason behind Japan’s increasing trade deficit is the increasing cost of its energy imports mostly from the Middle East.
After the Fukushima nuclear disaster of 11 March 2011 which ended up with the meltdown of three reactors, the Japanese government shut down
all nuclear plants in the country. Although a few still remain functioning and another 14 is expected to be restarted soon, the
future of the rest is still to be decided after time-taking safety inspections to come.
Current Japanese PM Shinzo Abe, albeit his predecessor, is a keen supporter of Japan’s reinstitution of its nuclear power base to a
certain extent. Nevertheless, nuclear energy once provided for 30% of the country’s need, and most of the lost amount will continue be
compensated with imported fossil fuels (such as oil and LNG) for the foreseeable future.
On the other hand, Japan continues to log a large trade deficit with China. With the depreciation of Japanese yen last year, the government
aimed to leverage its imbalance vis-à-vis China, but the depreciation move did not have a solid effect on Japanese exports in the short-run.
Meanwhile, Japanese imports were successfully reduced. Nevertheless, added to this picture was the continued outflow of Japanese capital
which decreases Japanese exports and even bears the potential to increase Japanese imports. Therefore monetary policies themeself were
not sufficient in this regard.
In the days to come, the Japanese government is expected to increase taxes on consumption and imports, while it will also take several
fiscal measures in order to rejuvenate exports. At the end of the day though, it seems very difficult for a country like Japan with a
decreasing saving rate and increasing energy consumption to level the gap through ad-hoc measures instead of structural ones and without
relying on nuclear energy up to a significant extent. – Eurasia Review


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