Japan posts record current account deficit

TOKYO —

Japan’s current account deficit in November tripled year-on-year to a record $5.7 billion as a weak yen pushed up the country’s post-Fukushima energy bills, official data showed Tuesday.

The shortfall in the current account hit 592.8 billion yen, easily eclipsing a deficit of 179.6 billion yen in the same month a year earlier.

The latest data marked the largest monthly current account deficit based on comparable data stretching back to 1985, blowing past a 455.6 billion yen shortfall in January 2012, according to the finance ministry.

November’s deficit largely stemmed from a growing trade imbalance stoked by Japan’s heavy dependence on importing pricey fossil fuels to generate electricity, after the country’s nuclear reactors were shut down in response to the 2011 tsunami-sparked atomic disaster.

The yen’s sharp depreciation since late 2012 has also bloated costs.

The current account is the broadest measure of Japan’s trade with the rest of the world, including not only trade in goods but also services, tourism and returns on the country’s foreign investment.

(c) 2014 AFP

  • 4

    BertieWooster

    Good to see Abenomics is working well!

  • 2

    Takumi Saito

    Abenomics = Bernankonomics

  • 4

    Serrano

    "as a weak yen pushed up the country’s post-Fukushima energy bills"

    Cripes, how did the Japanese ever pay their energy bills when the yen was 240 to the dollar just a little over 20 years ago?

  • -1

    JeffLee

    "Good to see Abenomics is working well!"

    Abenomonics is responsible for Japan's increased dependence on fuel imports since the March 2011 disaster? Um, OK.

  • 4

    fxgai

    Surprised to see AKBfan and JeffLee getting thumbs down for pointing out that Japan used to have at a fairly hefty source of domestic energy in nuclear power. Those guys get my thumbs up to compensate :)

    Like it or not, it's just a fact that without nuclear power, Japan's trade balance is getting hammered... and this is a big factor tailwind for the recent speculator driven weakness in the yen. I know nuclear power isn't popular, but I wonder how many nuclear power haters have loaded up on foreign currency to protect the value of any savings they have?

  • 3

    Jean ValJean

    " Abenomonics is responsible for Japan's increased dependence on fuel imports since the March 2011 disaster? Um, OK."

    Um...No. The 25%+ devaluation of the yen, thanks to doubling the currency supply is what he was referring to.

  • -3

    hkitagawa

    Turn on nuclear reactors, then deficit will vanish.

  • 2

    fxgai

    Jean,

    Fair point, but arguably the 25% devaluation is due primarily to speculators and what they think Kuroda-san's doubling the money supply means for the yen, rather than the doubling in and of itself (which is ongoing).

    Speculators will close out their short-yen positions in order to realise their profits, at some point. All they are waiting for is a trigger. Switching back on nuclear reactors might be such a trigger, if Abe and team have good advisers they will be wheeling out a boat load of market friendly deregulation at the same time so as to hope they can keep the speculators distracted. A trigger may also originate from overseas markets too...

  • 2

    warispeace

    Though people usually point to the Lehman shock as the start of the "great recession", actually it was a decline in the value of the dollar and a rise in oil and food costs prior to that that first put a pressure on spending and shook business confidence, hiring and the ability to repay housing loans.

    Conditions are different in Japan, but rising energy prices and rising food prices due to climate change will burst Abe-bubble-nomics.

  • -2

    James Dean Jnr.

    I don't know what the article means...

  • 0

    EthanWilber

    Further down the road, Japan’s worrisome trade imbalance calls Kuroda’s monetary policy into serious question. Here is the thing: If Japan handles quantitative easing, one of the pillar in Abenomic, without care, it might actually hunt Japan’s real growth in long term when the projected tax revenues fail to be realized.

    Another stumbling block that Japan will have face is its enormous growing debts. Japan's combined debts ratio to GDP is around 500% if combining the debts of government, corporate and private together. Such crushing debt ratio is highest in the developed countries.

    Hawkish Abe may be able to wield his approval rating through fanning nationalistic sentiment in Japan, but can he really bring Japan’s economic miracle back with such strong heading wind? The answer to the question is unknown.

    For the reference of a tale of two counties, China on the other side of spectrum just has had a record year of trade surplus, a whopping $260 billons for 2013. In addition, it’s annual trade topped $4 trillion, running a possibility to surpass the US as the world’s largest trader. Now people should have some clue why the US treads carefully and pragmatically with Japan and China on its foreign policy.

  • 0

    CanadianJapan

    Japan's trade balance had been declining even before Fukushima. It just speeded up the inevitable. Blaming fossil fuels only is propaganda from the pro-nuclear crowd. Let me give you some other reasons for the trade deficits. Go back 5 years and everyone in Japan had a Japan made cellphone and people were changing them every 2 years or so. Fast-forward to now and iPhones have taken 40% of the market, even Samsung and some Chinese manufacturers are increasing their market shares, all those imported phones are pushing imports up. Another thing is TV set. Ok, most TV sets in Japan are still made by Japanese companies and a lot are made in Japan. However, Japanese TVs are not selling at all outside of Japan, again the Korean and Chinese are crushing the Japanese. Soon or later it won't be worthwhile for Japanese manufacturers to make TVs only for Japan, they'll leave the market(some have already started to do so) and most TVs in Japan will be imported, again pushing up imports. Until then, the pro-nuclear people will keep blaming everything on fossil fuels imports in order to start up the nukes again... but in the long term, the trade deficit will only grow. Aside from cars Japan doesn't have any competitive products anymore. If the US gets their way with the TPP, cheap foreign rice and other agricultural imports will only push up imports even more. Disclaimer : I am short Japanese yen

  • 0

    FizzBit

    All they are waiting for is a trigger

    And that's the risky part.

    Ok, most TV sets in Japan are still made by Japanese companies and a lot are made in Japan

    When we were shopping for a TV a few years ago, I was told only Sharpe still manufactures and assembles their TV's in Japan. We bought a Toshiba

  • 0

    JeffLee

    "No. The 25%+ devaluation of the yen,"

    No. the yen's current rate is normal by historical standards. You're comparing it to a level when it shot up to an all-time record high, which was unsustainable anyway.

  • 1

    fxgai

    warispeace,

    Certainly Lehman was probably the climax of all the bad news. Sub-prime mortgages were already in the news in 2007. But the US dollar has been on the decline for a long time. (It might do better in the years ahead if the shale oil and gas boom does indeed turn the US into a net energy exporter, at least it seems it might be slightly better placed than the yen...)

    Rising food prices due to climate change? Bad weather might cause a supply shock every now and then for sure, but I believe the main factor there is the demand side, driven by a growing global middle class who want to eat good stuff. Japan can't do anything about that (unless they start a WWIII maybe!), so if food prices are going up, Japan is screwed regardless of Abenomics. If Japan wants to be able to buy food cheap it'll have to stop spending excessive amounts of money on foreign energy, and develop it's domestic energy sources. Even if the US energy boom kicks along there could be some golden years of cheaper energy ahead, but the cost of importing it over to Japan would still be not unsubstantial...

  • 0

    Jean ValJean

    " No. the yen's current rate is normal by historical standards. You're comparing it to a level when it shot up to an all-time record high, which was unsustainable anyway."

    It's true that the yen had strengthened to a record high, due lack of confidence in USD/EURO and other factors, but has taken a nosedive by QE-Infinity, rightly deemed currency manipulation by the few economists not high on QE stimulus. But the BOJ is about to fall on its own two-edged sword, cheered on by Keynesian tinfoil hatters.

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