Japan’s trade deficit
Trade Deficit in Japan Hits Record
Feb 19, 2012
Japan posted a record trade deficit in January as the yen’s strength and weaker global demand eroded profits at manufacturers and slowed the nation’s recovery from the earthquake and tsunami last year.
The trade gap widened to 1.48 trillion yen ($19 billion) and shipments dropped 9.3% compared with a year earlier, as energy imports surged, the Ministry of Finance reported on Monday in Tokyo.
Shipments to China, Japan’s largest market, fell 20 percent from a year earlier, the biggest decline since August 2009. Exports to Europe slid 7.7% and shipments to the United States advanced 0.6%.
The earthquake and tsunami led to the idling of nuclear plants and a surge in energy imports. Japan’s liquefied natural gas imports rose 12.2% to a record in 2011 as power utilities increased thermal power generation.
Energy needs accounted for most of the gain in imports in January.
It is a very big deal that Japan is slipping into negative trade territory for the first time in three decades. Last spring I was writing about how the global flow of funds – the massive tide of liquidity sloshing back and forth – involved Japan to a large degree. Japan was the hub of a massive carry trade, was buying huge amounts of US Treasurys and, in general, was a vast emitter of liquidity flows to the world.
With its reconstruction costs and now with its trade deficit, Japan becomes a net consumer of funds. In other words, the flow of funds reverses. This represents, at the very least, a change to the global liquidity tide charts.
In Part II: Implications of a Collapsing Japan, I lay out the case for how close to the brink of economic crisis Japan truly is, and why the country is likely to stumble faster and further in 2012 than the shaky situation in Europe that is currently grabbing the world's attention.
Make no mistake. A material retrenchment of the Japanese economy will have profound impact across the globe. One notable example: If Japan has to stop buying US Treasuries to direct capital to its domestic needs or – even worse – begins selling Treasuries for the same reason, the Federal Reserve will have to put its printing presses into overdrive to make up the gap.
Click here to access Part II of this report.