For the first time since 1980, Japan has come up short on exports. A trade deficit revealed in data released Wednesday showed the toll the triple disaster of 2011 has taken on the country’s economy, as well as highlighting the possibility that it may need to recruit foreign investors to help finance its massive debt if the trend continues.
Reuters reported that increased fuel importation costs in the wake of the earthquake and tsunami, coupled with slowing growth worldwide and the strength of the yen combined to hit Japan’s trade balance sheet for 2011. Japan still has abundant investments outside the country that bring in healthy returns, and its current accounts are expected to continue to outweigh trade deficits. But the country faces several disadvantages in 2012 that could take a toll on its economy.
Formerly heavily reliant on nuclear reactors for energy, after the Fukushima disaster left only four of its 54 reactors still running out of concern for public safety. That means heavily increased energy costs as the country turns to imports to supply its needs.
An aging population and receding competitive edge are also hitting the nation’s economy at the same time, making it more likely that, if its current account falls into deficit territory, its huge level of public debt will need to be supported by outside investors rather than Japanese citizens.
Jesper Koll, head of equities research at JPMorgan in Japan, was quoted saying, “What it means is that the time when Japan runs out of savings–’Sayonara net creditor country’–that point is coming closer. It means Japan becomes dependent on global savings to fund its deficit and either the currency weakens or interest rates rise.”
Japanese investors, however, who currently hold approximately 95% of the country’s debt, are far less likely to drop it from their portfolios than foreign investors already spooked by the eurozone crisis. That is fortunate, since at present public debt is double the size of the $5 trillion economy of Japan. The trade deficit for 2011 amounted to 2.49 trillion yen ($32 billion).