Posted by Mark Halper

This is what Japan’s trade deficit looks like. Liquefied natural gas tankers have been arriving to replace closed nuclear power plants.

Pick your cliché: Double whammy; Vicious circle; Stuffed.

All of them describe the parlous Japanese economy, which looked even worse today when the country reported a January trade deficit caused in large measure by the shutdown of almost all of the nation’s nuclear reactors.

Not just any trade deficit, mind you. In a country long accustomed to running a surplus by selling manufactured goods like cars and electronics to the rest of the world, Japan ran up a record deficit of 1.63 trillion yen ($17.4 billion), Bloomberg reports. A deficit means that more money is leaving the country than is coming in. Rudimentary economic says that’s okay up to a point, after which, it’s not.

Why the gigantic deficit in Japan?

No, Japanese consumers have not suddenly developed a special yen (sorry) to buy Fords or BMWs.

The chief culprit is imported fossil fuels.

In order to fill the electricity gap created by shutting down almost all of its nuclear power plants, Japan has had to purchase huge amounts of fossil fuels like coal and natural gas.


And here’s your vicious circle, your double whammy: Without nuclear, Japan needs those costly fossil fuels in order to power the factories that build those cars and electronics destined for foreign lands. Nuclear had provided about 30 percent of the country’s electricity before the tragic events of the March 2011 tsunami and earthquake prompted the closure of all but two of Japan’s 54 reactors.

Continuing with the circular theme, the growing demand is helping to weaken the yen, making the fossil fuels even more expensive and feeding the trade gap. As Bloomberg wrote, “Weakness in the yen that aids exporters such as Sharp Corp. and Sony Corp. also means the country pays more to import fossil fuels needed as nuclear reactors stand idle after the Fukushima crisis in 2011.” (Recall the irony that some of the imports are arriving via nuclear-powered icebreakers!).

One energy and economic adviser late last year  even warned of a potential “economic crisis or catastrophe” if Japan does not  restart nuclear The adviser, Nobuo Tanaka from Japan’s Institute of Energy Economics, warned of a huge deficit, among other hazards. That was a prescient, given today’s report. A leading politician from the ruling Liberal Democratic Party virtually repeated Tanaka’s economic warning a week ago.

The fossil fuels also come at a huge environmental cost. Unlike nuclear plants, fossil fuel generation emits CO2 linked to global warming.

As I’ve noted several times here recently, sentiment is swinging back towards support of nuclear power in Japan, where the Fukushima meltdowns and the human displacement that followed were caused by a disastrously bad engineering decision supported by a management culture impervious to questioning.


But a smart redeployment of existing reactors, followed by development of alternative nuclear technologies like thorium and molten salt reactors among others, marks an opportunity to bring the economy back onto safer ground.

It’s no wonder that newly elected Prime Minister Shinzo Abe is pushing for a restart, as is the country’s largest daily newspaper, the Yomiuri Shimbun. A leading economist effectively repeated that call today, in the Bloomberg story:

“The trade deficit means the yen can’t just keep weakening,” said Takeshi Minami, chief economist at Norinchukin Research Institute Co. in Tokyo. “Abe will probably restart some nuclear plants after the upper house elections in July as, without them, the costs to the economy are too great.”

Abe faces a difficult act. Current government policy attempts to keep the yen low to boost exports and help the economy recover  (exports actually rose, although imports rose much more, leading to the deficit ) but the weak yen pushes the price of imported fossil fuels sky high.

There’s that vicious circle again. Nuclear power can help the country spin out.

Photo from Shell


  1. John Norton says:

    Thanks for the word parlous. Sent me to the dictionary.

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