Japan Has Record Trade Deficit as Rising Fuel Bill Hurts Growth

Photographer: Tomohiro Ohsumi/Bloomberg

Shipping containers are stacked at the Aomi Container Terminal in this aerial photograph taken in Tokyo, Japan. Close

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Photographer: Tomohiro Ohsumi/Bloomberg

Shipping containers are stacked at the Aomi Container Terminal in this aerial photograph taken in Tokyo, Japan.

Japan, whose swelling trade surpluses stoked American ire in the 1980s and kept it from deeper stagnation during two decades of deflationary malaise, had a record deficit in 2013 thanks to a surging energy bill.

Three decades of surpluses came to a halt in 2011, when the Fukushima meltdowns shuttered nuclear-power plants. With a 16 percent increase in crude oil shipments, Japan had a trade gap of 11.5 trillion yen ($113 billion) in 2013, almost double the previous year, a finance ministry report showed in Tokyo.

“It’s hard to anticipate when Japan can emerge from trade deficits at this point,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “If a trade deficit as a result of high energy import costs makes Japan look like a high-cost country, it may discourage moves by companies to have production centers in Japan and undermine Abenomics.”

A restart of the nuclear plants isn’t assured, highlighting drags on the nation’s recovery that range from a debt burden more than twice the size of the economy to record population declines. Morihiro Hosokawa, a former prime minister who’s running to become governor of Tokyo, is campaigning for the reactors to be closed permanently.

Imports rose 25 percent in December from a year earlier and exports gained 15 percent, leaving a monthly deficit of 1.3 trillion yen in a record 18th straight shortfall. A lack of export momentum could partly reflect Japanese firms shifting business overseas and their declining competitiveness, some Bank of Japan board members said in minutes released today.

The Topix index of stocks fell 2.5 percent as of 2:33 p.m. in Tokyo amid global concerns about risks in emerging markets. The yen was at 102.50 per dollar, compared with a five-year low of 105.44 on Jan. 2.

Analyst Forecasts

The December figures compared with median estimates in a Bloomberg News survey of analysts for an increase in imports of 26 percent from a year earlier, a gain in exports of 18 percent, and a trade shortfall of about 1.2 trillion yen.

Some Japanese exporters are struggling even after the yen’s slide of about 25 percent in the past two years against the dollar. Nintendo Co. (7974) this month projected an operating loss and cut its sales forecast for the Wii U console.

In the minutes from a BOJ meeting in December, board members agreed that exports are likely to increase “moderately” as overseas economies improve.

“There’s no denying that 2013 was a bad year for trade,” Izumi Devalier, a Japan economist at HSBC Holdings Plc in Hong Kong, said in a report. “The sizeable and prolonged yen depreciation raised hopes that shipments would enjoy a lift towards the end of the year and help narrow the trade deficit. In reality, export volumes contracted in 2013.”

Cutting Prices

Devalier said that the trade deficit may narrow from the second quarter, as a sales-tax increase leads to weaker domestic demand, exports benefit from pick-ups in the U.S. and the euro region, and businesses make deeper cuts to their export prices as they become more confident in the outlook for the exchange rate.

“Fuel import volumes will decrease if nuclear power plants are restarted, but not immediately as it depends on the pace and timing of restarts,” Kazuyoshi Nakata, an economist at Mitsubishi UFJ Research & Consulting Co., said before the data.

American anger over Japanese imports (JNTBIMPY) in the 1980s showed itself in incidents such as one where U.S. lawmakers took sledgehammers to a Toshiba Corp. Radio.

To contact the reporters on this story: Chikako Mogi in Tokyo at cmogi@bloomberg.net; Keiko Ujikane in Tokyo at kujikane@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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