Long-term policy needs to be adopted to reduce trade deficit
(From The Japan Times January 31 issue)

Japan’s trade balance went into the red in 2011 — the first time since 1980 when soaring oil prices caused a trade deficit. But the current account balance is still in the black thanks to income generated by Japan’s overseas net assets amounting to some ¥250 trillion. This money is reinvested overseas to generate further income. Still, utmost care must be taken to prevent trade deficits from becoming a regular feature of the Japanese economy.

In 2011, Japan’s exports decreased 2.7 percent from 2010 to ¥65.554 trillion — the first dip in two years. Behind the fall were such factors as the serious damage inflicted on supply chains by the March 11 disasters and a slowdown of the world economy caused by the sovereign debt crises in Europe.

For the second consecutive year Japan’s imports rose, increasing by 12 percent from 2010 to ¥68.047 trillion. The crisis at Tokyo Electric Power Co.‘s Fukushima No. 1 nuclear power plant resulted in a 37.5 percent increase in liquid natural gas imports for use at thermal power plants― with the import volume and value hitting record highs. Crude oil imports also increased 21.3 percent.

The strong yen and high prices of energy resources will make it difficult for Japan to eliminate its trade deficit. Increased imports of LNG are also likely to continue as many nuclear power stations remain offline in the wake of the Fukushima nuclear crisis.

If the trade deficit continues and a current account deficit begins, Japan will face mounting problems. In such a situation, Japan will have to depend on overseas investors to purchase its bonds — a scenario that could jeopardize state finances.

The government should become serious about adopting a long-term policy aimed at changing the nation’s economic structure into one that will minimize consumption of energy resources from abroad and maximize the use of domestic renewable energy sources. It also needs measures to push innovation to help improve Japan’s international competitiveness.

日本語の抄訳はウィークリ2月11日号のP18に掲載されています。