Japan posts record first-half trade deficit, energy shortages

07/28/2012
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TOKYO (majirox news) — Japan posted its largest half-year trade deficit of 37.3 billion dollars, since the government started to record it in 1979. The damage to the trade balance was mainly due to a big jump in purchases of gas and oil, imported to make up the energy shortage caused by the lack of nuclear power generating capacity. Other reasons for the trade deficit are the European debt crisis, the faltering U.S. recovery and the strong yen, which have combined to drive down exports.

“Japan cannot continue its current energy policy,” Hiromichi Shirakawa, chief economist for Credit Suisse Japan. “It needs to turn on its nuclear power plants. Although it is a painful political decision, the country needs to reduce energy imports. The Japanese government also needs to stop the deterioration of Japanese manufacturing companies and its weak exports. Companies are losing their global competitiveness with other Asian countries and it’s a big problem for the nation.”

However, there is some light at the end of the tunnel. A small trade surplus was recorded in June and auto and auto parts helped boost exports 1.5 percent on a year-on-year basis.
But some experts say that things will have to get worse before there is any improvement.

“It is difficult to change the situation,” Shirakawa said. “The current trade deficit reflects a few structural factors such as a weakening of competitiveness, the aging population, and the energy polices. I think it’s a mess. I’m fairly pessimistic as to whether any policy actions can easily change this picture. I expect the trade deficit will continue for almost forever.”

This view is echoed by many ordinary people. Many say the government is not doing enough to help boost the economy, and that a drastic change is needed before things will improve.

“The Japanese economy is very bad, especially since we have been experiencing deflation for more than 10 years,” said Kenji Kazuya, a businessman in Tokyo. “We need to have an inflation policy. But the present government is not going the right direction. We need an election and to replace the ruling party.”

But this is not a universally held opinion. Though it would be hard to find anyone in Japan who feels that everything is going well, there are those who can see some good in the present system.

Hiro Shirohata, a businessman, said, “It seems like things are headed towards a favorable direction since I am not facing any difficulties. However, there are things that we should worry about such as the European crisis.”

Meanwhile, many analysts believe that things may get worse and the trade deficit larger.

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