Japan reported its first annual trade deficit since 1980 as it imported expensive energy to offset shortfalls caused by the devastating tsunami and manufacturers shifted production overseas to avoid the damage inflicted by the strong yen.
The ￥2.49 trillion (US$32 billion) deficit for last year reflected a 2.7 percent decline in the value of Japan’s exports to ￥65.55 trillion. Last month, the trade balance was a deficit of ￥205.1 billion, according to the Ministry of Finance figures released yesterday.
“It reflects fundamental changes in Japan’s economy, particularly among manufacturers,” said Hideki Matsumura, senior economist at Japan Research Institute. “Japan is losing its competitiveness to produce domestically.”
“It’s gotten difficult for manufacturers to export, so they’re they’ve moved production abroad so that products sold outside the country are made outside the country,” he said.
The yen’s surge to record levels against the dollar and euro has made Japanese exports more expensive and also erodes the value of foreign earned income when brought home. Recently, Nissan Motor Co and Panasonic Corp have shifted some of their output to factories overseas.
At the same time, Japan is facing intense competition from Taiwan, South Korea and Singapore, where labor and production costs are cheaper.
Japanese manufacturers have been battered by a host of negatives in the past year. The tsunami temporarily disrupted the production of automobile makers and others. Weakness in the US economy and Europe’s debt problems and recent flooding in Thailand, where many Japanese automakers have assembly lines, also contributed to export declines.
Another major factor behind the figures was the impact of the expensive energy imports Japan turned to after the March disaster touched off a nuclear crisis and led the country to shut down, or not restart, a large portion of its reactors, said Martin Schulz, senior economist with the Fujitsu Research Institute.
He said pressure to import energy will continue to weigh heavily on Japan for the next year, but will subside as the country pursues greater efficiency measures.
Much of Japan’s oil and natural gas is imported from the Middle East, with which Japan had a ￥10.88 trillion trade deficit last year, up 33 percent, figures showed.
Japan still has a trade surplus with the US, although that is shrinking. For last year, exports exceeded imports by ￥4.10 trillion, down 8.2 percent from a year earlier. Exports to the US declined 2.8 percent to ￥10.02 trillion during the year, while imports inched up 0.2 percent to ￥5.9 trillion.