Japan is on course for a second consecutive annual trade deficit in 2012, after it recorded a record shortfall in the value of exports over imports in the first half of the year.
Japan’s ability to sell more goods overseas than it buys has been a crucial driver of its economic success for decades. But its trade advantage has been blunted by a rising yen and a jump in the cost of fuel imports since last year’s Fukushima nuclear accident.
Between January and June, the trade deficit was Y2.92tn ($37.4bn), according to data released by the finance ministry on Wednesday. That exceeded the Y2.62tn deficit Japan recorded in the first half of 1980, in the wake of the second Arab oil shock.
Until last year, 1980 had been the last time Japan’s imports exceeded its exports over a full 12-month period, although it had recorded the occasional monthly imbalance.
The Fukushima disaster was the turning point: with many nuclear plants switched off since the meltdowns last March – for a brief time this year all 50 of the country’s surviving reactors were offline – utilities have been forced to import trillions of yen worth of additional natural gas and other fossil fuels to meet demand for power.
Yet while the abrupt rise in Japan’s import bill has been the immediate cause of the shift toward deficits, exports have also been weakening. They declined 2.3 per cent in June compared with a year earlier, and have been on a downward slide for 16 consecutive months on a seasonally adjusted basis, according to Barclays.
Imports also fell in June as the run-up in purchases of foreign liquefied natural gas experienced a pause and oil and gas prices eased slightly, though analysts expect the broad rise in Japan’s high fuel bills to continue. In nominal terms the trade account returned to surplus for the month, though it remained in deficit in seasonally adjusted terms, Barclays said.
Export-dependent Japanese manufacturers such as Toyota and Sony have struggled to contend with the effects of the yen’s sharp rise, which began in 2007. If they cannot cut costs in other ways, a strong yen forces companies that make goods in Japan to raise prices overseas or accept lower profit margins.
Many have been exporting at a loss to keep foreign markets supplied and Japanese factories running. On Wednesday Canon, the digital-camera maker, cut its full-year forecast by one-quarter to Y250bn on an expected slump in overseas sales, which make up 80 per cent of its revenues.
On Tuesday the yen touched a new 12-year high against the euro, compounding the effect of lower overall demand in Europe amid the continent’s economic crisis.
Kyohei Morita and Yuichiro Nagai, analysts at Barclays, said they expected Japan’s trade account to remain in deficit until at least the first half of next year. However, they said they expected rising demand in the US and China to lend some support to exports.-By Jonathan Soble