The shortfall was 437.3 billion yen ($5.4 billion) in January, the finance ministry said in Tokyo. Energy imports led the gap, highlighting the challenge for manufacturers that ended 2011 in better shape than previously estimated -- separate data today showed the economy shrank less in the fourth quarter than the government initially calculated.
The yen slipped after the current-account data underscored concern that a deepening trade gap will erode Japan’s status as the world’s largest creditor nation. With 52 of 54 nuclear reactors shut in the aftermath of the March 11 earthquake and tsunami that triggered meltdowns at the Fukushima plant, the nation is at risk of summer power shortages that disrupt production and increase costs for manufacturers.
“Fuel imports -- for generating electricity -- will remain high for as long as nuclear power is excluded from Japan’s energy mix,’” David Rea, an economist at Capital Economics Ltd. in London, said before today’s data. At the same time, seasonal factors were “an important cause” of the temporary deficit, he said.
The yen traded at 81.27 per dollar as of 10:09 a.m. in Tokyo, down 0.2 percent.
Disaster’s Toll
Gross domestic product shrank an annualized 0.7 percent in the three months ended Dec. 31, the Cabinet Office said, compared with a preliminary estimate of a 2.3 percent contraction. Higher-than-estimated capital spending was the biggest factor in the revision, which compared with a median forecast in a Bloomberg News survey of a 0.6 percent contraction.
The quake last year, Japan’s strongest on record with a magnitude of 9, and the resulting tsunami destroyed or damaged more than 1 million houses and is estimated by the government to have caused 16.9 trillion yen of damage. More than 19,000 people were left dead or missing.
The economy may be poised to return to growth this quarter as reconstruction work kicks in and after monetary easing by the central bank weakened the yen, aiding exporters such as Toyota Motor Corp. (7203) and Sony Corp. (6758)
Deficit Nation
Japan’s most recent previous deficit in the current account was a 133 billion yen shortfall in January 2009, which was also the record before today’s figure. While the nation’s income surplus prevents any immediate swing to becoming a deficit nation, JPMorgan Securities Japan forecasts that change may come in 2015, while BNP Paribas SA (BNP) estimates about 2020.
“When this happens the government will need to look to overseas creditors to finance its fiscal borrowing needs,” Rea said. The higher returns that international investors would require, combined with the existing debt burden, could lead to public finances reaching “crisis point,” he said.
Japan risks going down the same road as Greece as the cost of funding the world’s largest public debt rises in years ahead, Takatoshi Ito, a former senior Ministry of Finance official, said in a March 5 interview in Tokyo.
When local investors reach their limit for funding the nation’s bonds, the Bank of Japan “will either have to monetize the debt or we will need foreigners to purchase bonds and yields will jump,” said Ito, who was deputy vice finance minister from 1999 to 2001. “That will be the start of Japan becoming Greece.”
To contact the reporters on this story: Andy Sharp in Tokyo at asharp5@bloomberg.net; Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net
http://www.bloomberg.com/news/2012-03-07/japan-posts-record-current-account-deficit-on-energy-costs-1-.html
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