Japan logged a record annual trade deficit, up 65 percent from a year ago, due to soaring energy costs and a weak yen.
The trade gap hit 11.5 billion yen ($112.07 billion) in 2013—almost double that of the previous year—as a weakening yen pushed the cost of energy imports, according to a finance ministry report.
The weak yen bodes well for Japan’s exports, which increased for the first time in three years, but this has also made imports more expensive for energy-starved Japan which relies heavily on crude oil shipments.
Increased demand for energy, following the shutdown of nuclear reactors in the wake of the Fukushima crisis in 2011, has driven up energy imports, leaving Japan with a swelling energy bill.
According to the latest trade data, Japan’s imports of Liquefied Natural Gas (LNG) rose 0.2 percent by volume in 2013 from the previous year. The value of those imports surged nearly 18 percent. Crude oil imports increased by 16 percent.
“It’s hard to anticipate when Japan can emerge from trade deficits at this point,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“If a trade deficit as a result of high energy import costs makes Japan look like a high-cost country, it may discourage moves by companies to have production centers in Japan and undermine Abenomics.”
A rise in exports, coupled with a jump in earnings of exporters, was hoped to help Japan’s economic recovery. However, the weak currency has also made imports more expensive and affected the country’s trade balance.
“This is the costly flip side of Abenomics,” Martin Schulz of Fujitsu Research Institute in Tokyo told the BBC.
“The overall cost of imports is going up, but the exports are not rising enough to offset that.”
By Maesie Bertumen
Image: Matthew Kenwrick/Flickr