The nation's trade deficit, which hit a record 4.41 trillion yen in fiscal 2011, is expected to grow if idled nuclear power plants are not restarted, as liquefied natural gas imports for thermal power generation continue to climb.
Last year's balance of trade was the largest deficit since fiscal 1979. The previous high, a deficit of 3.13 trillion yen, was posted in the wake of the second oil crisis triggered by the Iranian Revolution, according to figures released Thursday by the Finance Ministry.
Commenting on the trade deficit, Tadashi Okamura, chairman of the Japan Chamber of Commerce and Industry, said, "I don't think the negative balance will continue for long, but I am afraid of the country's trade surplus continuing to shrink."
Earthquake and tsunami impact
The trade deficit increase is due mainly to the effects of the Great East Japan Earthquake on domestic production facilities and drops in exports because of the global economic downturn coupled with the European sovereign debt crisis.
Additionally, imports swelled sharply on increased LNG imports for thermal power generation to compensate for nuclear power plants idled following the Great East Japan Earthquake and tsunami.
In particular, the trade deficit with China, Japan's largest trading partner, was 2.3 trillion yen in fiscal 2011, the second highest since fiscal 2006, when the deficit reached 2.8 trillion yen.
In trade with China, exports dipped 6.9 percent year-on-year mainly due to declines in steel and plastics exports. However, imports from China shot up 6.8 percent due mainly to such factors as an increase of more than 30 percent from a year earlier in communications equipment, including smartphones.
In trade with Asia as a whole, the trade surplus in fiscal 2011 shrank by 46.9 percent from fiscal 2010, to 5.22 trillion yen. The plunge was mainly due to soaring LNG imports from Indonesia, Brunei and others.
The surplus in the balance of goods traded with Europe fell to an all-time low of 919.4 billion yen, reflecting the continued effects of the eurozone's debt crisis.
Automobile and semiconductor exports to Europe were particularly poor, causing the total value of exports to Europe to log a decline for the first time in two years.
Several factors contribute to dip
Although exports dropped markedly after the March 11, 2011, disaster, the supply chain networks of industrial parts manufacturers were quickly returned to normal. As a result, the trade balance of the country was in the black for the June-July period.
However, the continued appreciation of the yen and the prolonged European crisis put downward pressure on the nation's trade performance, causing the deficit to increase.
The trade deficit for January this year was 1.48 trillion yen, a record high for a single month, but dropped to 82.6 billion yen in March.
LNG imports in fiscal 2011 were up 52.2 percent from the year before, hitting 5.4 trillion yen.
Had LNG imports in fiscal 2011 been the same as fiscal 2010, the fiscal 2011 trade deficit would have been more than 40 percent lower--about 2.56 trillion yen--according to analysts.
Even without increased LNG imports, the trade deficit shows the continuing impact of the Great East Japan Earthquake on exports, the analysts said.
With all nuclear power plants in the country likely idled in May, indications are that LNG imports will increase this fiscal year, contributing to an even larger trade deficit.
Copyright 2012 The Yomiuri Shimbun. All Rights Reserved.
(Originally published April 21, 2012, in The Daily Yomiuri.)