Japan: Exports in Trouble

July 24th, 2014
in econ_news

Large Trade Deficit Persists
But (Some) Help May Be on the Horizon to Reduce Imports

breaking-news-130px7Econintersect: Japanese exports fell unexpectedly in June by 2% year-over-year.  Bloomberg says the median forecast had been for a 1% increase.  Imports increased by 8.4% year-over-year, producing a trade deficit of ¥822.2 billion ($8.1 billion).  This was the 23rd month for a trade deficit for Japan and the 31st deficit in the last 36 months.  For the 25 years and more before the Great Recession of 2007-2009, Japan consistently ran large trade surpluses.

Follow up:

And while the trade surpluses seemed to return to consistently positive status in late 2009 and through 2010, they turned generally negative as imports increased significantly, exacerbated by increased petroleum imports following the country's nuclear power shutdowns after the Fukushima nuclear disaster in March 2011.

About 34% of Japan's imports are fuels , approximately ¥2.3 trillion ($22 billion).  As nuclear power starts to return to production (two plants just received preliminary approval to restart), the burden of high value energy imports will diminish.  Before the shutdown Japan had 48 nuclear power plants producing about 30% of the country's electrical power.  Two plants coming on line at a yet to be defined date will not restore a significant fraction of the lost power.  But it is a start.

However, to have produced a trade surplus in June imports would have had to been reduced by more than ¥822 billion.  That would have required more than the output of all 48 closed plants which we estimate have a value around ¥250 billion per month.  Japan has a long road yet to travel to recover a positive balance of trade and restoring nuclear power cannot do it alone.

According to Kiichi Murashima, chief economist at Citigroup Inc. in Tokyo, quoted by Bloomberg:

"Export recovery will be sluggish mainly due to structural reasons.  The trade deficit will remain at the current level through the end of this year with both exports and imports growing slightly."

The structural problems referred result from Japanese companies manufacturing more and more overseas at the points of sale.

Japan-balance-of-trade-1983-2014

Sources:

Japan Trade Deficit Expands After Exports Unexpectedly Drop (Masaaki Iwamoto and Keiko Ujikane, Bloomberg, 23 July 2014)

Japan: Exports Decline in May (GEI News, 18 June 2014)

Japan Balance of Trade (Trading Economics, 23 July 2014)

Two Japan nuclear reactors pass restart hurdle (BBC News, 16 July 2014)

UPDATE 1-Japan June crude imports rise 1 pct, LNG up 5.9 pct (Osamu Tsukimori, Reuters, 24 July 2014)

The Rise in the Cost of Power Generation in Japan after the Fukishima Daiichi Accident and Its Impact on the Finances of the Electric Power Utilities (Yuhji Matsuo and Yuhji Yamaguchi, The Institute of Energy Economics, Japan, IEE Journal, November 2013)









Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.















 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved