Japan logged a record ¥4.41 trillion trade deficit in fiscal 2011 as the March 11 disasters, the strong yen, reliance on foreign energy and Europe’s debt crisis all rattled the economy throughout the year, the Finance Ministry said Thursday.
The quadruple threat forced exports down 3.7 percent from the previous year to ¥65.28 trillion. Imports grew 11.6 percent to ¥69.69 trillion.
“There was the impact of the earthquake, and the strong yen also came into play. The overseas economy slipped as well,” a Finance Ministry official said. “Exports grew because of higher reliance on imported energy resources, with the nuclear power plants being deactivated. High oil prices were also a factor.”
It’s the first time the trade balance has fallen into the red since 2008, when the collapse of Lehman Brothers triggered a global financial crisis and resulted in a ¥764 billion deficit. The 2011 deficit also eclipsed the record ¥3.12 trillion recorded in fiscal 1979 amid the oil crisis.
Japan ran a trade surplus of ¥5.33 trillion in fiscal 2010.
“The fact that the trade deficit reached an all-time high has a strong impact. But exports were influenced mostly by one-time factors, such as the March 11 quake-tsunami and Thailand’s floods,” Yasuo Yamamoto, senior economist at Mizuho Research Institute, told The Japan Times.
But while exports may eventually return to their previous levels, Yamamoto said, the ever-expanding cost of imports may signal an end to the era of Japan racking up trillions of profit in trade.
“As recently as five to six years ago, Japan had annual trade surpluses of ¥10 trillion. Those days may already be behind us,” he said.
The preliminary Finance Ministry report released Thursday backs this view.
In fiscal 2011, imports of liquefied natural gas from countries such as Qatar and United Arab Emirates shot up 52.2 percent from the previous year to ¥5.4 trillion. Imports of crude oil and petroleum from countries including Saudi Arabia and Vietnam grew 21.9 percent to ¥11.89 trillion.
Only one of Japan’s 54 commercial nuclear reactors was active as of Thursday. The lone holdout, in Tomari, Hokkaido, is scheduled to go offline May 5.
“Imports of LNG jumped 26 percent in May 2011, and have continued to record double-digit growth every month until today,” the Finance Ministry official said, adding that reliance on thermal power plants following the Fukushima crisis remains high.
“Dependence on such energy resources will likely continue, while we are also seeing oil prices staying high,” he said, predicting that high energy costs will likely be a long-term trend.
By region, Japan’s trade surplus with the European Union plunged 49.8 percent to a record low ¥919 billion.
While Japan’s overall exports recovered in the July-September quarter by 0.5 percent due to improvement in supply chains after the March 11 disasters, this was quickly overshadowed by Europe’s sovereign debt crisis in the next two quarters.
The Finance Ministry official explained that even the slowdown in Japan’s exports to China, which logged a ¥2.3 trillion deficit, was influenced by the slow economy in Europe.
“China’s exports to Europe declined, which caused Japan’s exports to China to drop sharply as well,” he explained.
Exports in fiscal 2011 of plastic material to China fell 9.2 percent while iron and steel were down 10.7 percent.
The trade statistics for March alone, also released Thursday, showed a deficit of ¥82.6 billion. Exports to the United States, however, were strong, including a 46.2 percent increase in automobile trade. But overall, the month’s 5.9 percent increase in exports was offset by a 10.5 percent increase in imports.
On the outlook for the current account balance, consisting of trade and interest earnings from investments abroad, Mizuho Research Institute’s Yamamoto predicted that it will remain sound.
“The income balance will continue in the black” and will be more than enough to cover Japan’s trade loss, he said. It is difficult to imagine a scenario where inflows from Japan’s investments overseas will be lost anytime soon, he added.
LNG price confab
The Ministry of Economy, Trade and Industry will organize a meeting in Tokyo in mid-September of private- and public-sector officials from countries that either produce or consume liquefied natural gas, ministry officials said Wednesday.
Since the price of LNG coveted by Japan and other Asian countries has remained high in tandem with crude oil, METI wants to promote dialogue to expedite development and trade in the resource so prices can eventually come down, the officials said.