Last year Japan was once again exposed to the extensive repercussions of natural disaster. The earthquake and tsunami which rocked the country in March 2011 forced the evacuation of over 150,000 people and destroyed farming and fishery industries after triggering reactor meltdowns and radiation leaks at Tokyo Electric Power Co.’s Fukushima Da-Ichi plant.
Understandably, since then the contentious nuclear debate has gathered momentum. Every week following the disaster has seen thousands protesting in Tokyo against nuclear power. Now a recent poll has revealed that 47 per cent of the population are in favour of completely ditching the energy source.
According to a report which analysed the poll’s results it seems that ‘Japanese citizens are prepared for a policy shift to green energy from nuclear power and consequent lifestyle changes and cost burdens’.
The fifth most polluting country in the world will be deciding on its long-term energy policy in the coming weeks and it is thought that the results of this poll will play a large part in the decision making process. Meanwhile, the after effects of the earthquake and tsunami which triggered this surge in debate continue to add to Japan’s economic contraction.
The country’s recovery has also been significantly undermined by stumbling global growth and today Japan reported the largest trade deficit seen for July since 1979.
Contributing factors include a stronger yen eroding export sales and profits, higher oil prices giving imports a boost and the Chinese slowdown/European sovereign-debt crisis causing exports to drop. Since July of last year shipments from Japan to China have dipped 12 per cent whilst those to the European Union have dropped by a massive 25 per cent – the biggest decline for 3 years.
As a result of these issues Japan recorded a bigger than anticipated trade deficit in July. Although the 28 analysts involved in a Bloomberg News survey gave a median prediction of a deficit of 270 billion yen, in reality the shortfall was nearly double that at 517.4 billion yen. The Finance Ministry in Tokyo also asserted today that whilst imports had risen by 2.1 per cent exports had dropped by 8.1 per cent compared with the previous year – 5.2 per cent more than anticipated.
In the first quarter of 2012 Japan’s gross domestic product advanced an annualised 5.5 per cent, but in the second quarter this figure dropped to 1.4 per cent. In reaction to this situation Kohei Okazaki (an economist with Nomura Securities Co.) asserted ‘It’s unavoidable that Japan’s economic growth will lose steam this quarter. Global demand is looking stagnant as China’s economy is slowing while the advanced nations’ economies remain weak’.
Consequently, pressure on the Japanese government to instigate policies which will reinforce domestic demand is intensifying. A senior economist at Sumitomo Mitsui Asset Management Co. advocated monetary easing and government spending measures. Hiroaki Muto stated: ‘Japan needs more monetary stimulus to sustain the recovery. Sentiment among manufacturers is deteriorating globally, triggered by Europe’s fiscal problems, and that’s adversely affecting Asian economies.’
The Central Bank will announce its latest policy decision on September 19th. Until then eyes will be turned to Europe in anticipation of a long awaited decisive move.
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