Japan’s trade balance

Seeing red

After half a century of trade surpluses, Japan is now in deficit

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Readers' comments




Fukushima has killed the Kyoto protocol. The Japanese have little choice but to abandon nuclear power and go to increased fossil fuel consumption. It is highly unlikely they will meet their carbon emission targets.

Also, the Economist seems to think the Japanese are undertaxed, if such a thing were even possible. I beg to differ, having lived in Japan for seven years and become familiar with their tax system. The effective top marginal rate on income tax is about 50% including municipal and prefectural taxes. On top of this, there is a 5% national sales tax, and a slew of other annoying taxes including enterprise taxes, property taxes, vehicle taxes, liqour, tobacco, and gasoline taxes. There is even a tax for using bathhouses (I kid you not)and the corporate tax rate at 30% is one of the highest in the world.

The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin - Mark Twain


Good piece on Japan, as usual. I would only add that as the senior generations dies off, at some point (dont' ask me when) the massive social security bill will come down, and gov debt will come down. The article makes the very important point that Japan is a classic 19th century liberal state - small gov, low taxes, low social security spending, low health and education spending. All this makes the maintenance of a CA surplus easier, once the millstone of the old is gone.


All In All it dosen't look good for the japanies those saying its not so bad and thay can hindle it will be like those whoe said the same about Italy last year,


If part of Japan's problem is insufficient domestic consumption, then increasing taxes on consumption will reduce it further, leaving Japan even more reliant on foreign demand to sustain economic growth.


Well the Europeans didn't react untill it was too late, why would japan wich hasn't undergone any significant change since 1867 sidenly undergo a reforming zee, thay have 4 years and thats it.


I wouldn’t worry too much about Japan’s seeing red (no pun intended).

The trade deficit in 2011 was probably a fluke due to Sendai earthquake, its subsequent nuclear fallout and the flooding in Thailand where many Japanese factories (auto plants in particular) are situated and hit hard. Japan remains one of the few richest countries in the world nonetheless.

What is becoming a point of contention and source of potential trouble for Japanese economy is that while Japan is under strong pull of the US foreign policy being still occupied with US troops and military bases and all, China is now Japan’s largest trading partner which tends to push Japan to the “other” direction that may not bode well with the US containment policy of China nor for such matters as US sanction of Iran which provides a significant portion of Japanese oil import.

How to handle the problem smartly and to maintain a delicate and sustainable balance there in Japan’s foreign affairs is much more urgent and important to Japanese people than just to keep a trade surplus, IMO.


Japan’s Glorious Stagnation

Foreign investors i.e. American hedge funds, banks, etc. don’t like Japan because Japan’s real estate and financial markets have been flat. That’s what’s meant by “lost decade”. It’s not that it’s been that bad for ordinary Japanese, what’s been “lost” is the opportunity for these foreign investors to make capital gains and extract more money out of Japan for themselves.


According to my relatives in Tokyo, there have been a lot of unexplained medical symptoms. One reason for the deficit could be the Japs aging may have been accelerated due to the Fukushima incident.


One point that everyobody forgets that when "future generations die off" not only are social spending costs reduced but so is overall GDP which leads to a deflationary spiral. Physical assets will have less monetary value then before and with less people to pay the debt, the debt to GDP ratio will also continue to rise.
Now trying to time all this, many a bond fund and trader has gone bust trying to time when yields will rise on Japanese debt or default. The savings are there and yes we read about housewives becoming currency traders but those are few and far between. Western risk aversion models do not quite capture the dynamics hence why lots of bond traders in New York, London, Dallas and Tokyo have gone bust.
4 years? Number pulled out of hat, black box but runs on human assumptions, I would not want to bet any money on this anytime soon. It will continue longer than Europe and just be that much slower and more painful to watch. Like watching grass grow.

Two-Continental in reply to notbyintent

This and Kohai's comments seem the most realistic if you consider what has led up to Japan's current state: a variety of slow-growing problems, all of which are at least loosely codependent. Japan's spiraling debt situation has continue to bleed like a hemorrhage, exacerbated slowly by the ever-increasing demographic shift, which is itself a slowly growing problem. All the while, Japan's economy is slowly losing its competitive edge to its neighbors, who are slowly becoming more competent, relative to Japan. Not even the biggest earthquake in its history will shift this snail-paced trend.

Where all this leads is another story, and I don't think there is any way to know, until we get there. Japan is entering uncharted territory - no European (or any other, for that matter) country has the unique mix of demography and debt that Japan currently has. As an employee of a Japanese company, I can only tell you that the door is always in my periphery, as sad as it makes me feel to say it.


Not that simple to just raise taxes. Might be time to short Japan. Such marvelous people, hard working, civil, but no resources whatsoever. The knowledge economy is being outcompeted by lower cost Korea and increasingly China. Japan will be okay but it will fall toward the East Asian mean.


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