Econintersect: Monday 17 January 2014 Japan reported a trade deficit for 2013 of ¥11.5 trillion (US $111 billion). The combination of increased dependance on imported energy and the 30% decline in the yen against the U.S. dollar has pushed Japan to its worst annual trade deficit ever. The 2011 Fukushima nuclear disaster following the devastating earthquake and tsunami resulted in Japan shutting down the rest of its nuclear power facilities because of safety and environmental concerns.
However, Japan continues to carry a current account surplus despite a record deficit for the month of November 2013 (-¥592.8 billion or – $5.72 billion). For the eleven months through November the current account surplus YTD stands at ¥3.76 trillion ($36.3 billion).
The current account is composed of the balance of trade plus other cash flows: factor income (earnings on foreign investments minus payments made to foreign investors) and cash transfers.
The third component of the balance of payments is the capital account, which has almost always been negative for Japan as the country invests more overseaes than it receives in foreign investment. The capital account has only been reported through the second quarter of 2013 and was -¥459 billion ($4.4 billion). Extrapolating that number for the full year projects a capital account deficit less than $10 billion for 2013.
The balance of trade thus will be the dominant factor in Japan’s balance of payments for 2013 (which it usually is). Thus the balance of payments is likely to remain positive for Japan for 2013, somewhere near +$30 billion. For comparison, the balance of payments for the U.S. in 2013 will likely be a deficit between $50 and $100 billion, the net of a current account deficit projected to be between $300 and $400 billion and a capital account surplus between $250 and $350 billion.
Sources:
- Japan Economic Indicators (Trading Economics, 28 January 2014)
- Japan records worst trade deficit following nuclear shutdown (Ben McLannahan and Shawn Donnan, Financial Times, 27 January 2014)
- Fred Data Base (St. Louis Fed)
