The trade balance of a nation is simply the numerical difference between what that nation exports minus what it imports. Japan is the world’s third largest economy and a leading exporting nation, but last year’s tsunami coupled with the slowdown in what passes for the economic recovery following the global financial crisis has put that position under pressure.
The tsunami triggered a chain of events that led to an accident at the Fukushima nuclear power plant (largely due to human failures rather than nature or design, it turns out). A nuclear accident is a very sensitive issue in a nation which has suffered an atomic weapons attack. Consequently, nuclear generation facilities were taken off-line for checking and only one has been restarted since the disaster. This means that Japan has had to import fossil fuels for power generation, pushing up imports.
The Eurozone crisis and sluggish recoveries in Europe and the USA coupled with (relatively) weak demand in China have reduced demand for Japanese exports. Added to this is the fact that the Yen is seen as a safe-haven currency and has appreciated against the currencies of her major trading partners, making exports more expensive in importing markets. These factors have led to a record trade deficit in Japan for the first half of the year of $37 billion (2.9 trillion Yen).
Japan’s exports rose by 1.5% from the same period last year – but, of course, output was heavily disrupted by the tsunami. Imports were up by 7.4% over the same period. The Yen is trading at 94.6 to the Euro: a year ago, it was worth 16.1% less against the Euro, highlighting the problems that Japan’s exporters are having marketing to the Eurozone.