January 24, 2012 / 11:21 AM / 8 years ago

REFILE-Exporter Japan eyes first trade deficit in 3 decades

By Stanley White	
    TOKYO, Jan 24 (Reuters) - Japan probably produced its
first trade deficit last year in more than three decades as
energy imports surged to cover for the loss of nuclear power
following the Fukushima disaster, a major blow to an economy
built on its exports prowess.	
    For decades Japan used an exports-orientated economic policy
to build up global brand names such as Toyota, Sony and Canon
and a manufacturing might that was the envy of the world.	
    Official trade figures due for release on Wednesday are
expected to show that Japan swung to a deficit for the first
time since 1980, as utilities purchased fossil fuels for power
stations to make up for the loss of nuclear power.	
    Economists say Japan's trade will be in deficit for the next
few years as it copes with the Fukushima catastrophe that
released radiation into the atmosphere and forced most nuclear
power stations to shut in the face of a public outcry over
safety.	
    Trade will then return to a surplus, but long-term trends
suggest the surplus will weaken anyhow. A rise in the yen to a
record last year of fewer than 77 per dollar from more than 250
in 1980 is making Japanese exports increasingly uncompetitive
and so encouraging manufacturers to move overseas.	
    "Japan can continue to export goods, but if you focus
exclusively on the trade balance, then the days as an exporter
are ending," said Seiji Adachi, senior economist at Deutsche
Securities.	
    The argument that Japan can rely on surpluses from its
international trade to offset a large public debt could also
look less convincing and lead some investors to bet that a
funding crisis will come sooner than originally expected.	
    "Last year I thought we could continue to finance our debt
for 10 years. Now I think it's seven years," Adachi said.	
    Trade data for December and 2011 as a whole is due on
Wednesday at 8:50 a.m. (Tuesday 2350 GMT). Adachi forecasts a
2011 deficit of 2.4 trillion yen ($31.2 billion).	
    That would be the first shortfall since a 2.6 trillion yen
deficit in 1980, one ironically also caused by a jump in oil
import costs when world prices rose.	
    Since then Japan has been able to rely on exports of goods,
including its iconic autos, MP3 players, computer chips and in
recent years games consoles, to produce one trade surplus after
another.	
    	
    ENERGY NEEDS	
    Liquefied natural gas imports jumped to a record last year
as utilities turned to gas-fired power generation to plug the
gap left by the shutdown of most nuclear reactors after the
March 11 earthquake caused the worst nuclear disaster in 25
years.	
    Japan, the world's third-biggest oil consumer, has also seen
import values rise due to high crude prices. Assuming that oil
prices remain high, this could also keep Japan in a trade
deficit for the next few years, economists say.	
    The trade deficit could narrow to 1.9 trillion yen in 2012
and then widen to 2.2 trillion yen in 2013, Adachi said.	
    In addition to energy imports, a surge in outward-bound
mergers and acquisitions by Japanese firms will also lower
export volumes as manufacturers go abroad, Adachi said. They are
also expanding production to overseas locations rather than in
Japan.	
    Years of trade surpluses and a high savings rate among
Japanese fuelled confidence that the country could comfortably
service its mounting debt, which has reached twice the size of
its $5 trillion economy, the biggest burden among industrialised
nations.	
    Japan has avoided the sell-off in its sovereign debt that
has become common in debt-stricken Europe.	
    One reason, analysts have often cited, is that running a
trade surplus makes Japan a creditor to other nations. Hefty
holding of overseas assets by Japanese investors also helped
give Japan a high credit status.	
    Economists have predicted that as the Japanese population
ages and the savings rate falls that these surpluses could swing
to deficits.	
    A shift from nuclear power generation could prove expensive
enough to hasten the oncoming of Japan as a deficit nation and
increase the need for tax hikes and spending cuts to lower
outstanding debt.	
    The change in Japan's energy balance is also proving painful
for Japanese companies as it is happening largely without a
well-defined energy policy from the government to assure firms
that energy supplies and costs will remain stable in the future.	
    Nippon Keidanren, the country's largest business lobby,
cited uncertainty about energy, a strong yen and the
manufacturing shift overseas on Tuesday as reasons why pay
raises are out of the question for annual labour union
negotiations in the spring.	
    "The wild card is energy costs," said Hiroaki Muto, senior
economist at Sumitomo Mitsui Asset Management Co.	
    "What we really need is some type of revolution to make
ourselves more energy efficient. In that sense, you could say
the government's energy policy is contributing to all of this."	
    The trade deficit could peak out at 5 trillion yen in 2015
due to expensive energy imports, Muto predicted
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