Japan’s monthly trade deficit rose to a record level in January, casting doubt on the vitality of Prime Minister Shinzo Abe’s economic agenda, as the BBC reports. A falling yen, combined with increased energy imports resulting from the nuclear shutdown after the 2011 Fukushima disaster, are the main drivers of the high trade deficit.
The Japanese yen has lost nearly 20% of its value against the US dollar over the past year, but the weak currency has also made imports more expensive and affected the country’s trade balance.The world’s third-largest economy has had to import most of its energy needs after it shut all of its nuclear reactors in the aftermath of the tsunami and earthquake in 2011.
This points to a long-term weakness for Japan. The country has very few domestic energy sources. It relies on imports for more than 85 percent of its energy mix, nearly 30 percent of which came from nuclear before Fukushima. Today, Japan is the world’s largest importer of liquified natural gas, third largest oil importer, and second largest coal importer, and it is paying dearly for these honors.Over the years, Japan’s economic success has been driven by culture rather than the kinds of natural riches found in powerhouses like China, the United States, Germany, or Russia. Abe is trying to re-invigorate Japan’s cultural engines for 21st century. The jury is still out on how successful that effort will be. Without a doubt, the stakes are very high.