Japan to run a current account deficit

Japan logged a trade deficit of ¥2.49 trillion ($32 billion) for 2011, ministry of finance data showed, the first annual deficit since 1980, after the economy was hit by the shock of rising oil prices.

Were Japan to run a current account deficit, it would spell trouble because it would mean the country cannot finance its huge public debt -- already twice the size of its $5 trillion economy -- without overseas funds.

Japanese investors currently hold about 95% of Japan’s government bonds, which lends some stability to an otherwise unsustainable debt burden.

Domestic buyers are less likely to dump debt at the first whiff of economic trouble, unlike foreign investors, as Europe’s debt crisis has shown.

The trade data sent the yen to a one-month low against the dollar and the euro.

The aftermath of the March earthquake raised fuel import costs while slowing global growth and the yen’s strength hit exports, data released on Wednesday showed, swinging the 2011 trade balance into deficit.

Only four of the country’s 54 nuclear power reactors are running due to public safety fears following the March disaster.

Sources:
 livemint.com