The Japan That Can't Export? Its 2012 Trade Deficit

Japan used to epitomize the Asian Exporting Nation, feared around the world for its superior-quality and in-demand products. Those glory days, however, are rapidly receding like the hairline of HRH Prince William the Bald. Most recently, the news was that Japan had a "record" trade deficit in 2013. It actually isn't as dire as the headline sounds since Japan's postwar deficits haven't been remotely American-sized to begin with. Against that scale, a $78B annual trade deficit isn't all that large. But, by Japanese standards, it may be alarming nonetheless as headwinds in generating and sustaining an economic recovery.

Importantly, these are headwinds that won't be going away any time soon as the WSJ describes:

1. Territorial conflicts with China over a bunch of lousy, largely uninhabitable rocks hurting sales of Japanese-branded products in the PRC;
2. Increased imports of energy after shutting down virtually all of its nuclear reactors in the wake of Fukushima;
3. Continued economic malaise in Western consumer markets;
4. A still historically strong yen despite its recent weakening to around 90 yen to the dollar.

To be sure, it is possible that the territorial spat will blow over in a few months. I have also posted about the incumbent LDP being keen on reviving nuclear power plants where possible and building new ones to assuage safety concerns if not. I think the West has seen its better days, but there are other places where Japan may export called...wait for it..."emerging markets". Given the policy of unlimited easing Japan will soon unveil, I think the yen is set to decline as well.

Larger worries, though, concern the niggling fear that Japan's Asian coolness factor has long since been eclipsed by South Korea. Nobody really wants Hitachi and Panasonic TVs anymore; they would rather have Samsungs and LGs. Ditto for the gadget-making prowess of Sony which hasn't had a portable device hit in ages. Last I checked, Western automakers were living in fear of Korean and not Japanese auto imports, too. In soft power terms, the Koreans have improbably taken up the mantle as well via the K-Wave. In other words, all the factors identified above do matter, but ultimately it's Japan's inability to innovate that's causing the most damage to it export prospects.

Heck, maybe they'll even welcome--heaven forbid--migrants injecting fresh new commercial ideas and new consumers into a society that has become moribund in addition to homogeneous.