The trade deficit is simply the (negative) difference between the value of goods that a nation exports to the rest of the world minus its imports. In February, Japan’s trade deficit eased to approximately $8 billion which was still a third higher than analysts had anticipated, but a significant improvement over January’s record deficit of $27 billion. The deficit for February was up by 3.5% over the position a year ago.
The February deficit is the smallest for nine months, but is the twentieth consecutive monthly result when Japan spent more on imports than it made on exports. This is the longest streak of trade deficits in the nation’s history since records began to be kept in their current format in 1979. Japan’s exports increased by 9.8% in February and although imports also increased by 9%, it was a much smaller rise than seen in January where imports rose by 25%. Japan’s exports have enjoyed 12 straight months of improvement – helped by the weakening Yen.
Demand for imported goods is thought likely to peak before an increased sales tax comes into force in April. Indeed, the current import data suggests that sales of iPhones, expensive household furniture and luxury cars (notably from the EU) are up as consumers seek to beat the tax deadline.
The nation continues to rely on imports of fossil fuels to make up for the shortfall of nuclear power generation capacity which has been idled in the aftermath of the March 2011 earthquake and tsunami. According to the Finance Ministry, imports of liquefied natural gas (LNG) rose by 11.4% and those for liquefied petroleum gas (LPG) were up by 14.8% in February. Virtually all of the LNG and LPG imports are burned in power stations to make electricity – before the tsunami, Japan met approximately 30% of its electricity generation needs from nuclear sources.