Japan’s trade deficit has increased fourfold in March in comparison to the position in March 2013. A major driver for the growing shortfall between Japan’s net import and export balance has been the cost of replacing some 30% of the nation’s energy supply from nuclear power production to conventional fossil fuel (mainly liquefied petroleum gas, or LPG and liquefied natural gas (LNG)). The reasons for the transition were always political rather than technical. In the aftermath of the March 2011 earthquake and tsunami, the motors which pump cooling water around the reactors were allowed to fail – they simply ran out of diesel. This caused a build-up of pressure within the reactor containment and ultimately led to an explosion which vented volatile gases and some radioactivity into the environment, triggering a wide-scale evacuation. All of Japan’s nuclear reactors were taken off-line for safety checks and permission to restart them has yet to be granted.
Since Prime Minister Abe came to power in December 2012, the Yen has fallen from roughly 82 to the Dollar to stand at 102.4 currently; a depreciation of 25%. Consequently, the costs of purchasing LPG have risen by a fourth on the basis of the change in exchange rates alone – and import revenue on specific products has fallen, but this obviously improves Japan’s trade volume as exported goods become more competitive.
The trade deficit in March stood at $14 billion with LPG and LNG imports up by 8 and 4% year-on-year, respectively. In a recent policy statement, the government signalled that it intended to bring some of Japan’s idle nuclear power generation back on line. This would help the trade deficit since it would reduce the nation’s dependence on fuel imports as it would be using an existing stockpile of nuclear fuel, however the move will be contentious when it happens.