JAPAN’S FIRST TRADE DEFICIT SINCE 1980

JAPAN SEES FIRST TRADE GAP SINCE 1980

Toru Fujioka, Andy Sharp and Eleanor Warnock

Bloomberg, January 25, 2012

Japan’s first annual trade gap since 1980, driven by an energy-import surge as nuclear plants shut down and by a shift of manufacturing overseas, threatens to undermine the nation’s status as the world’s largest creditor.

A third straight monthly merchandise trade deficit in December capped an annual shortfall of 2.49 trillion yen ($32 billion), the finance ministry said in Tokyo today. The data reflect the impact of the record earthquake in March, which sparked a nuclear crisis that shut most reactors, as well as longer-term shifts such as Nissan Motor Co.’s decision to move some production to lower-cost Thailand.

“This is more than hollowing out -- the government hasn’t found any solutions to electricity and at this point I don’t see that we’re going to have nuclear power back again,” said Masaaki Kanno, chief economist in Tokyo at JPMorgan Securities Japan Co. The deficit will “expand in coming years,” he said.

Money flowing out through trade may erode investors’confidence that Japan’s creditor status makes it a haven for investment, complicating the government’s efforts to manage the world’s largest public debt. Policy makers have said the country’s shrinking population means it will need to turn increasingly to foreign investors to buy its bonds.

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