Japan suffered its first trade deficit in over three decades in 2011, a year that saw natural disasters and a nuclear crisis, a historic rise in the yen and a sharp drop-off in global demand stemming from the European financial crisis.
According to Finance Ministry statistics released Wednesday, exports were down by 2.7 percent from the previous year, slipping to ¥65.55 trillion. Imports, meanwhile, grew by 12 percent, to ¥68.05 trillion, for a trade deficit of ¥2.5 trillion.
The last trade deficit occurred in 1980, amid the second oil crisis. Japan had a ¥6.63 trillion trade surplus in 2010.
Rather than signaling the end of an era for the export-oriented country, analysts suggest the deficit is largely attributable to one-time factors, such as the disruption of supply chains after the March 11 quake-tsunami and the historic rise in the yen’s value.
However, they also cautioned that the trade balance may not tip the other way until the yen weakens and global demand picks up.
“The statistics revealed today weren’t good, but within the range of what we expected,” Satoshi Osanai, an economist at Daiwa Research Institute Inc., told The Japan Times on Wednesday.
While there is concern that exports won’t recover as quickly as desired, Osanai said a return to a trade surplus is the most likely scenario.
“The trade deficit wasn’t induced by structural reasons but rather from the slow economy overseas in Europe and Asia,” he said.
“The yen’s exchange rate needs to be monitored closely, but once the sluggish economy overseas picks up, things will improve” for Japan as well, he added.
Overall in 2011, Japan imported 78.5 million tons of liquefied natural gas, the most ever in terms of quantity and cost, according to the Finance Ministry. Imports of crude oil and petroleum also grew in terms of cost, rising 21.3 percent.
The greatest imbalance — at ¥10.87 trillion — was with Middle Eastern countries, including oil exporters such as Saudi Arabia and the United Arab Emirates.
Concurrently, the value of auto exports shrank by 10.6 percent, due in large part to the flooding in Thailand and the strong yen. Exports of electronics and semiconductors also shrank by 14.2 percent.
Trade with China resulted in a deficit of ¥1.73 trillion, as exports fell by 1.4 percent while imports grew by 9.1 percent.
“Exports were hurt by the March 11 earthquake, as well as the strong yen and the frail economy overseas,” a Finance Ministry official said, noting Japan also had to rely heavily on imported energy due to the Fukushima No. 1 nuclear crisis.
“Manufacturers’ supply chains and domestic production recovered after the quake, but by the end of the year exports were being influenced by Europe’s sovereign debt crisis,” the official also noted.
Meanwhile, Bank of Japan Gov. Masaaki Shirakawa stressed that the current account, consisting of trade and interest earnings from investments abroad, remains sound, thanks to large inflows from Japan’s investments overseas.
“Japan has a stock of net external assets,” Shirakawa said Tuesday, anticipating the trade deficit announcement the following day.
“The income balance is expected to continue growing,” making it unlikely the current account will go into the red, he added.
Speaking ahead of the expected announcement of the trade deficit, he stressed it was a passing occurrence caused by the March 11 disasters.
“I don’t think the trend is here to stay,” Shirakawa said during a news conference Tuesday.
The monthly trade statistics for December, also revealed Tuesday, showed Japan had a deficit of ¥205.1 billion for the month.