Japan's trade deficit hits record on weak yen, higher energy costs

Nuclear plant shutdowns and higher import costs drag down the third-biggest economy

PUBLISHED : Tuesday, 28 January, 2014, 1:35am
UPDATED : Tuesday, 28 January, 2014, 1:35am

Japan reported a record annual trade deficit last year as energy shipments and weakness in the yen pumped up the nation's import bill.

The shortfall was 11.5 trillion yen (HK$871 billion), almost double the previous year's 6.9 trillion yen, a finance ministry report showed in Tokyo yesterday. Imports rose 25 per cent in December from a year earlier and exports gained 15 per cent, leaving a monthly deficit of 1.3 trillion yen.

A record 18 consecutive monthly deficits show how nuclear plant shutdowns, higher import costs, and limited gains in export volumes are dragging on Prime Minister Shinzo Abe's efforts - known as Abenomics - to sustain momentum in the world's third-biggest economy.

Goldman Sachs Group said yesterday that monthly shortfalls of about one trillion yen may persist "for some time".

"It's hard to anticipate when Japan can emerge from trade deficits at this point," said Takeshi Minami, chief economist at Norinchukin Research Institute.

It’s hard to anticipate when Japan can emerge from trade deficits

"If a trade deficit as a result of high energy import costs makes Japan look like a high-cost country, it may discourage moves by companies to have production centres in Japan and undermine Abenomics."

The lack of export momentum may also be affected by Japanese firms developing business overseas and also their falling competitiveness, some Bank of Japan board members said in the minutes released yesterday of its December policy meeting.

The Topix index was down 2.6 per cent at 1,231.97 points yesterday in Tokyo, after the yen rallied to a seven-week high and US equities tumbled on new concerns that the global economy recovery will falter.

The yen was little changed against the dollar.

Last year's import bill was inflated by a 16 per cent increase in crude oil shipments to Japan and an 18 per cent rise in liquefied natural gas imports.

While Abe wants to restart the nuclear plants, Morihiro Hosokawa, a former prime minister who is running to become governor of Tokyo, is bidding to close them permanently.

Winning the February 9 election would provide Hosokawa with a platform to oppose Abe's efforts.

"Fuel import volumes will decrease if nuclear power plants are restarted, but not immediately as it depends on the pace and timing of restarts," Kazuyoshi Nakata, an economist at Mitsubishi UFJ Research & Consulting, said before the data was released.

The December figures compared with median estimates in a survey of analysts for an increase in imports of 26 per cent from a year earlier, a gain in exports of 18 per cent, and a trade shortfall of about 1.2 trillion yen.