In January, Japan posted its largest trade deficit in decades. On February 20, the country’s deficit had reached 1.48 trillion yen (roughly 19 billion U.S. dollars). Following its nuclear crisis, Japan has been forced to rely heavily on imports, which has driven up its trade deficit.
On March 11, 2011, Japan was hit with an earthquake and tsunami that resulted in multiple meltdowns at the Fukushima Dai-ichi nuclear plant. The government was forced to stop the almost all reactors for inspection.
The resource-poor country relies heavily on nuclear power. With almost all of its nuclear reactors shut down for reexamination, the country has been forced to import large quantities of fuel.
The nuclear crisis has not been the only cause of Japan’s trade deficit. A weak global economy and a strong yen have worked against Japan. On top of increased imports, exports have greatly decreased.
Dr. Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland, and expert on economic policy and international economics, gave his opinion on the current state of the Japanese economy.
“Japan has had to abandon nuclear power, [and] the overwhelming need for natural power is throwing them into deficit,”said Morici.
Morici acknowledge that this, however, is not the only problem with Japan’s economy. He addresses some other problems facing Japan.
“Japan hasn’t made much progress over the last 20 years. They greatly benefitted from an undervalued currency and that’s going away. With electronics, the Chinese economy is hard to beat and the structural changes in Detroit have not helped Japan in [the automobile industry],” explained Morici.
Like most countries today, Japan has many issues to address before it can turn its economy around. At this time one can only speculate what will come and the impact it will have on the global economy.