That’s because the multi-billion dollar trade deficit represents product demand opportunities for exports to Japan since the country is a net spender on a specific set of goods highlighted below.
Drilling down from its overall negative balance, Japan performed worst in its international trade with partners from Asia incurring a -$119.4 billion shortfall. Exporters in the Middle East also profited at Japan’s expense, accounting for a -$119.1 billion trade deficit at Japan’s expense. European exporters also satisfied demand as shown by a -$29.7 billion Japanese deficit.
Country-specific trade deficits indicate Japan’s competitive disadvantages and areas which foreign businesses can and do exploit. Japan accumulated the world’s fourth-biggest trade deficit during 2014.
Japan’s trade deficit in 2014 contrasts with the Japanese $75.7 billion trade surplus during 2010.
Product Demand Opportunities for Exports to Japan
Top 10
The following list shows the top 10 general product categories under which Japan racked up the severest trade deficits during 2014.
- Mineral fuels including oil: -US$246.2 billion (52.6% of all product deficits)
- Ores, slag, ash: -$30.1 billion (6.4%)
- Pharmaceuticals: -$17 billion (3.6%)
- Clothing (not knit or crochet): -$14.6 billion (3.1%)
- Knit or crochet clothing, accessories: -$14.4 billion (3.1%)
- Wood: -$11.5 billion (2.5%)
- Gems, precious metals: -$10.3 billion (2.2%)
- Fish: -$10.1 billion (2.2%)
- Meat: -$9.5 billion (2%)
- Furniture, lighting , signs: -$7.2 billion (1.5%)
The above top 10 product categories represent 79.3% of Japan’s overall product-category deficit subtotal which amounted to -$467.8 billion. For that subtotal, 70 of Japan’s 97 general product categories incurred deficits in 2014 while the remaining 27 categories delivered surplus amounts.
Growth
Japan deepened its trade deficit amounts at the greatest-pace during 2010 to 2014 under the product categories below.
- Paper: Up 2,218% since 2010 (-US$1.1 billion)
- Cotton: Up 1,843% (-$178.6 million)
- Books, newspapers, pictures: Up 430.2% (-$942.9 million)
- Modified starches, enzymes: Up 298.6% (-$397.4 million)
- Raw hides, skins not furskins, leather: Up 153.2% (-$94.2 million)
- Wool: Up 136.2% (-$303.5 million)
- Ships, boats: Up 101.3% (-$91 million)
- Clocks , watches including parts: Up 99.6% (-$2.1 billion)
- Furniture, lighting , signs: Up 53.6% (-$7.2 billion)
- Paper yarn, woven fabric: Up 49.7% (-$69.6 million)
Detail
From the perspective of the more detailed 4-digit harmonized tariff system (HTS) level, below are 15 products that pushed Japan into the most costly deficits versus its international trade partners.
- Crude oil: -US$130.7 billion
- Petroleum gases: -$84.3 billion
- Phone system devices: -$21.1 billion
- Coal, solid fuels made from coal: -$19.7 billion
- Iron ores, concentrates: -$15.9 billion
- Computers, optical readers: -$14.9 billion
- Medication mixes in dosage: -$11.8 billion
- Processed petroleum oils: -$11.5 billion
- Copper ores, concentrates: -$10 billion
- Aluminum (unwrought): -$6 billion
- Cases, handbags, wallets: -$5.2 billion
- Platinum (unwrought): -$5.2 billion
- Jerseys, pullovers (knit or crochet): -$4.9 billion
- Insulated wire/cable: -$4.6 billion
- Blood fractions (including antisera): -$4.4 billion
Among these, phone system devices had the fastest-growing Japanese deficit accelerating by 151.6% since 2010. In second place were petroleum gases up 74% while negative net exports for processed petroleum oils appreciated by 62%.
Major Product Demand by Japan’s Supplying Countries
Top 10
The following list presents trade partners with which Japan racked up the highest trade deficits in 2014.
- China: -US$56.7 billion (17.3% of Japanese country-specific deficits)
- Saudi Arabia: -$39.9 billion (12.1%)
- Australia: -$34.2 billion (10.4%)
- United Arab Emirates: -$32.1 billion (9.8%)
- Qatar: -$31.9 billion (9.7%)
- Russia: -$16.2 billion (4.9%)
- Malaysia: -$15.3 billion (4.7%)
- Indonesia: -$11.1 billion (3.4%)
- Kuwait: -$10.4 billion (3.2%)
- Chile: -$6.5 billion (2%)
The above 10 trade partners represent 77.4% of Japan’s subtotal deficit of $328.8 billion from the 81 geographic entities with which Japan demonstrated strong import demand .That subtotal excludes the 137 geographic entities with which Japan earned trade surpluses.
Growth
Japan grew its trade deficit amounts with the geographic entities below at the fastest-pace during 2010 to 2014, providing evidence of accelerating demand for exports from theseinternational suppliers.
- Vietnam: Up 152,169% since 2010 (-US$3.7 billion)
- Gabon: Up 51,995% (-$1.4 billion)
- Madagascar: Up 30,099% (-$117.5 million)
- China: Up 1,412% (-$56.7 billion)
- Cambodia: Up 966.8% (-$516.1 million)
- Romania: Up 768% (-$162.1 million)
- Belize: Up 385.9% (-$6.8 million)
- Italy: Up 353.9% (-$5.5 billion)
- Sweden: Up 258.2% (-$838 million)
- Papua New Guinea: Up 227.6% (-$2.3 billion)
From the above list, we see that Japan generated multi-billion-dollar negative trade balances with China, Italy, Vietnam and Papa New Guinea.
China
Below are the products thatresulted in the greatest Japanese deficits in international trade with China.
- Phone system devices: -US$18.3 billion (13.7% of Japan’s deficit vs. China)
- Computers, optical readers: -$13.2 billion (9.8%)
- Jerseys, pullovers (knit or crochet): -$3.9 billion (2.9%)
- Solar power diodes/semi-conductors: -$3.1 billion (2.3%)
- Cases, handbags, wallets: -$2.7 billion (2%)
- Women’s clothing (not knit or crochet): -$2.4 billion (1.8%)
- Table games, bowling equipment: -$2.2 billion (1.6%)
- Insulated wire/cable: -$2.2 billion (1.6%)
- Air conditioners: -$1.9 billion (1.4%)
- TV receivers/monitors/projectors: -$1.9 billion (1.4%)
Among these, solar power diodes and semi-conductors imported from China accelerating went from a $1.3 billion surplus in 2010 to a -$3.1 billion deficit in 2014. In second place were phone system devices up 8.9% followed by computers, optical readers appreciating by 2.2%.
Saudi
Below are the products that resulted in the greatest Japanese deficits in international trade with Saudi Arabia.
- Crude oil: -US$43.5 billion (91.8% of Japan’s deficit vs. Saudi)
- Processed petroleum oils: -$1.7 billion (3.5%)
- Petroleum gases: -$1.3 billion (2.6%)
- Acyclic alcohols: -$458.6 million (1%)
- Aluminum (unwrought): -$224.1 million (0.5%)
- Copper waste, scrap: -$120.7 million (0.3%)
- Ethylene polymers: -$87.8 million (0.2%)
- Cyclic hydrocarbons: -$26.3 million (0.1%)
- Propylene/olefin polymers: -$18.8 million (04%)
- Fertilizer mixes: -$15.4 million (03%)
Among these, unwrought aluminum had the fastest-growing Japanese deficit with Saudi Arabia accelerating by 6,463% from 2010 to 2014. In second place were fertilizer mixes up 196% followed by cyclic hydrocarbons increasing by 86.7%.
Australia
Below are the products that resulted in the greatest Japanese deficits in international trade with Australia.
- Petroleum gases: -US$15.8 billion (32.9% of Japan’s deficit vs. Australia)
- Coal, solid fuels made from coal: -$12.7 billion (26.4%)
- Iron ores, concentrates: -$9 billion (18.8%)
- Copper ores, concentrates: -$1.5 billion (3.1%)
- Aluminum (unwrought): -$1.1 billion (2.3%)
- Crude oil: -$1 billion (2.2%)
- Fresh or chilled beef: -$845.8 million (1.8%)
- Frozen beef: -$629.1 million (1.3%)
- Fuel wood, wood chips, sawdust: -$473.1 million (1%)
- Cheese, curd: -$353.4 million (0.7%)
Among these, only petroleum gases posted a trade deficit that increased in size from 2010 to 2014, up 8.9%.
Research Sources:
The World Factbook, Country Profiles, Central Intelligence Agency. Accessed on December 19, 2015
Trade Map, International Trade Centre. Accessed on December 19, 2015
Investopedia, Net Exports Definition. Accessed on December 19, 2015