Japan recorded its largest trade deficit ever in 2013 — some 11.5-trillion yen (US$113 billion). This record shortfall is primarily driven by the countryâ??s growing need for imported energy, which is an entirely new phenomenon for a generation of Japanese. Prior to 2011, when an earthquake and resultant tsunami triggered the Fukushima meltdown, Japan had enjoyed more than three decades of energy surpluses. Post-quake, the decision of Japanâ??s government to shut down nuclear energy plants has caused a spike in the price of crude oil and other energy imports. Combine this situation with an overall increase of 25 percent in December imports, and you donâ??t have a very attractive situation for international investors. According to Takeshi Minami, chief economist at the Norinchukin Research Institute, â??If a trade deficit as a result of high energy imports makes Japan look like a high-cost country, it may discourage moves by companies to have production centers in Japan and undermine Abenomics.â?ť â??Abenomicsâ?ť is the nickname given to Japanâ??s recent economic policy shifts under Prime Minister Shinto Abe to lift the worldâ??s third-biggest economy from its decadesâ?? long recession. Now, however, battling a growing deficit adds another component to this complex situation, and may be enough to derail Japanâ??s recovery and inhibit investment entirely.
Sign up to the Human Events newsletter