Econintersect: Nuclear power was in slow decline in Japan before the year ago earthquake and tsunami that created the nuclear plant disaster in Fukushima Prefecture. But in the aftermath of the disaster nuclear power generation has dropped 90% from what it was one year ago in the days before the March 11 event. This presents a key economic challenge for Japan: The increasing use of expensive imported energy sources is coming at a time when exports are facing ever more headwinds and business conditions erode. This summer may well see capacity constrained power shortages and this could reduce production of key export items at just the wrong time to maintain Japan’s current account surplus.
Only one of Japan’s 54 nuclear generators is in operation now. The power shortages this summer could be avoided if some of these nuclear plants were brought back on line. However, growing public opposition to nuclear power makes that unlikely. The following graph shows how Japan’s dependency on imported fossil fuels is increasing.
The economic problems for Japan are evident in the trade balance numbers. The latest numbers from the Japanese government (10 April 2012) reported a current account balance surplus of ¥1.1778 trillion ($14.4 billion) for the month of February. Although it was up from a deficit in January, the surplus was 30.7% lower than it was one year ago. The surplus was supported by the income account balance (from firms’ foreign investment) and by increased exports to the U.S. Here is a summary from The Japan Times:
…the services trade balance logged a deficit of ¥130.4 billion, ballooning from ¥31.9 billion last year, and the balance in goods and services trade posted a ¥28.3 billion deficit, sinking from a ¥688.4 billion surplus.
The goods trade balance logged a ¥102.1 billion surplus, the first black ink in five months but down 85.8 percent year on year. Exports meanwhile declined 2.0 percent to ¥5.2477 trillion while imports grew 11.1 percent to ¥5.1456 trillion.
In January, the current account balance logged its first deficit in three years as exports were slowed by the Europe’s flagging economy and sovereign debt crisis, imports soared on higher crude oil prices and surging consumption of liquefied natural gas to fuel thermal power generation and offset the drop in nuclear power…
A contributor to the increased services deficit was the sharp drop in tourism attributed to the earthquake, tsunami, nuclear disaster.
Sources:
- Surge in fuel imports may come with dire side effects. (Chico Harlan, The Japan Times from The Washington Post, 10 April 2012)
- Japan Shifting Power Sources (Washington Post, 7 April 2012)
- Current account balance rebounds (The Japan Times, 10 April 2012)
