Japan's first trade deficit since 1980 raises debt doubts (Reuters)

TOKYO (Reuters) – Japan first annual trade deficit in more than 30 years calls into question how much longer the country can rely on exports to help finance a huge public debt without having to turn to fickle foreign investors.

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.

Few analysts expect Japan to immediately run a deficit in the current account, which includes trade and returns on the country's huge portfolio of investments abroad. A steady inflow of profits and capital gains from overseas still outweighs the trade deficit.

But the trade figures underscore a broader trend of Japan's declining global competitive edge and a rapidly ageing population, compounding the immediate problem of increased reliance on fuel imports due to the loss of nuclear power.

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

"What it means is that the time when Japan runs out of savings -- 'Sayonara net creditor country' -- that point is coming closer," said Jesper Koll, head of equities research at JPMorgan in Japan.

"It means Japan becomes dependent on global savings to fund its deficit and either the currency weakens or interest rates rise."

That prospect could give added impetus to Prime Minister Yoshihiko Noda's push to double Japan's 5 percent sales tax in two stages by October 2015 to fund the bulging social security costs of a fast-ageing society.

The biggest opposition party, although agreeing with the need for a higher levy, is threatening to block legislation in parliament's upper house in hopes of forcing a general election.

Japan logged a trade deficit of 2.49 trillion yen ($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 percent 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 helped send the yen to a one-month low against the dollar and the euro on Wednesday.

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Graphic on 2011 trade data http://link.reuters.com/mev26s

Dec trade balance http://link.reuters.com/vyq65s

Exports by destination http://link.reuters.com/far65s

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"HOLLOWING OUT," AGEING POPULATION

Total exports shrank 2.7 percent last year while imports surged 12.0 percent, reflecting reduced earnings from goods and services and higher spending on crude and fuel oil. Annual imports of liquefied natural gas hit a record high.

In a sign of the continuing pain from slowing global growth, exports fell 8.0 percent in December from a year earlier, roughly matching a median market forecast for a 7.9 percent drop, due partly to weak shipments of electronics parts.

Imports rose 8.1 percent in December from a year earlier, in line with a 8.0 percent annual gain expected, bringing the trade balance to a deficit of 205.1 billion yen, against 139.7 billion yen expected. It marked the third straight month of deficits.

Japan managed to sustain annual trade surpluses through the Asian financial crisis of the late 1990s and the post-Lehman Brothers global recession that started in late 2008, which makes the 2011 dip into deficit all the more dramatic.

A generation ago, Japan was the world's export juggernaut, churning out a stream of innovative products from the likes of Sony and Toyota.

Much like China today, Japan's bulging trade surplus became a source of friction with the United States and other advanced economies, who pressed Tokyo to allow the yen to rise more rapidly in order to reduce the imbalance.

A 1985 agreement between Japan, the United States and Europe's big economies -- known as the Plaza Accord after the New York hotel where it was signed -- pushed the yen higher against the U.S. dollar.

Many economists argue that sowed the seeds of Japan's current debt woes. After the Plaza Accord, Japan's economy weakened and its central bank slashed interest rates, which contributed to a credit boom that eventually spawned a financial crisis and led to two decades of economic stagnation.

Bank of Japan Governor Masaaki Shirakawa said on Tuesday he did not expect trade deficits to become a pattern, and did not foresee the country's current account balance tipping into the red in the near future.

But Japan's days of logging huge trade surpluses may be over as it relies more on fuel imports and manufacturers move production offshore to cope with rising costs and a strong yen, a trend that may weaken the Japanese currency longer term.

A fast-ageing population also means a growing number of elderly Japanese will be running down their savings.

Chief Cabinet Secretary Osamu Fujimura said the government wants to closely watch the trend of exports and imports.

"There are worries that the yen's strength is driving Japanese industry to go abroad," said Fujimura. "We have to create new industries ... implement comprehensive steps to boost growth. It is important to secure employment within the nation."

($1=77.71 yen)

(Additional writing by Leika Kihara; Editing by Linda Sieg and Emily Kaiser)

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Japan anti-nuclear protests mark 6 months since quake (Reuters)

TOKYO (Reuters) – Anti-nuclear protesters took to the streets of Tokyo and other cities on Sunday to mark six months since the March earthquake and tsunami and vent their anger at the government's handling of the nuclear crisis set off by meltdowns at the Fukushima power plant.

In one of the largest protests, an estimated 2,500 people marched past the headquarters of the plant's operator, Tokyo Electric Power Company, and created a "human chain" around the building of the Trade Ministry that oversees the power industry.

The magnitude 9.0 earthquake and tsunami that hit Japan's northeastern coast left 20,000 dead or missing and crippled the Fukushima plant, triggering the worst nuclear crisis since Chernobyl.

The accident that led to radiation and contamination fears spurred widespread calls for an end to Japan's reliance on nuclear power in the quake-prone country.

Protesters, marching to the beat of drums, called for a complete shutdown of nuclear power plants across Japan and demanded a shift in government policy toward alternative sources of energy.

Among the protestors were four young men who declared the start of a 10-day hunger strike to bring about change in Japan's nuclear policy.

"I believe it is very important that the young generation voices opposition against nuclear power, and in order to bring our point across we need to put ourselves on the line and that's why we chose to hunger strike for 10 days," said 20-year-old Naoya Okamoto.

Japanese media reported similar protests in other cities across Japan on the day many offered prayers to those who died in the March 11 disaster.

(Reporting by Olivier Fabre; Writing by Tomasz Janowski)

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Japan marks 6 months since earthquake, tsunami (AP)

By TOMOKO A. HOSAKA, Associated Press Tomoko A. Hosaka, Associated Press – Sun Sep 11, 11:58 am ET

TOKYO – Up and down Japan's devastated northeast coast, survivors prayed and communities came together Sunday to mark six months since the massive earthquake and tsunami struck on March 11, a date that changed everything for them and their country.

As the world commemorated the 10th anniversary of the World Trade Center attacks, Japanese parents hung colorful paper cranes for their lost children and monks chanted in front of smashed buildings. Thousands also marched in the streets to demand that the country abandon nuclear power because of damage to the Fukushima Dai-ichi nuclear plant.

At precisely 2:46 p.m., they stopped and observed a minute of silence.

The magnitude-9.0 earthquake produced the sort of devastation Japan hadn't seen since World War II. The tsunami that followed engulfed the northeast and wiped out entire towns. The waves inundated the Fukushima plant, triggering the worst nuclear accident since Chernobyl.

Some 20,000 people are dead or missing. More than 800,000 homes were completely or partially destroyed. The disaster crippled businesses, roads and infrastructure. The Japanese Red Cross Society estimates that 400,000 people were displaced.

Half a year later, there are physical signs of progress.

Much of the debris has been cleared away or at least organized into big piles. In the port city of Kesennuma, many of the boats carried inland by the tsunami have been removed. Most evacuees have moved out of high school gyms and into temporary shelters or apartments.

The supply chain problems that led to critical parts shortages for Japan's auto and electronics makers are nearly resolved. Industrial production has almost recovered to pre-quake levels.

But beyond the surface is anxiety and frustration among survivors facing an uncertain future. They are growing increasingly impatient with a government they describe as too slow and without direction.

Masayuki Komatsu, a fisherman in Kesennuma, wants to restart his abalone farming business.

But he worries about radiation in the sea from the still-leaking Fukushima plant and isn't sure if his products will be safe enough to sell. He said officials are not providing adequate radiation information for local fisherman.

"I wonder if the government considers our horrible circumstances and the radiation concerns of people in my business," said Komatsu, who also lost his home.

Another resident, 80-year-old Takashi Sugawara, lost his sister in the tsunami and now lives in temporary housing. He wants to rebuild his home but is stuck in limbo for the time being.

"My family is not very wealthy, and I only wish that the country would decide what to do about the area as soon as possible," Sugawara said.

He might be waiting for a while. The Nikkei financial newspaper reported this week that many municipalities in the hardest-hit prefecture of Miyagi, Iwate and Fukushima have yet to draft reconstruction plans.

Of the 31 cities, towns and villages severely damaged by the disaster, just four have finalized their plans, the Nikkei said. The scale of the disaster, the national government's slow response and quarrels among residents have delayed the rebuilding process.

Workers at the Fukushima nuclear plant are still struggling to meet a goal of bringing it to a cold shutdown by early next year.

"We are barely keeping the reactors under control and the situation is still difficult," Nuclear and Industrial Safety Agency spokesman Yoshinori Moriyama said in Tokyo.

In Fukushima city, dozens of citizens rallied Sunday outside a government-backed international conference at which scientists agreed that the radiation danger from the nuclear plant was far less than Chernobyl. The protesters accused conference organizers of trying to underestimate the risk for children.

Citizens also demonstrated in major cities like Tokyo and Osaka, where thousands of anti-nuclear protesters demanded that the country give up nuclear power. Activists circled the Ministry of Economy, Trade and Industry holding banners saying, "Nuclear power? Goodbye."

Criticism of the government's handling of the disaster and nuclear crisis led former Prime Minister Naoto Kan to resign. Former Finance Minister Yoshihiko Noda took over nine days ago, becoming Japan's sixth new prime minister in five years.

He spent much of Saturday visiting Miyage and Iwate prefectures, promising more funding to speed up recovery efforts and trying to shore up confidence in his administration.

But the trip was overshadowed later in the day by his first big political embarrassment. Noda's new trade minister Yoshio Hachiro resigned, caving into intense pressure after calling the area around the nuclear plant "a town of death," a comment seen as insensitive to nuclear evacuees.

Public support for the new government started out strong, with an approval rating of 62.8 percent in a Kyodo News poll released last Saturday. Hachiro's resignation will likely translate into a drop and new doubts about Noda's ability to lead.

Regardless of politics, what's clear is that the road ahead will be long.

"Given the enormous scale of the destruction and the massive area affected, this will be a long and complex recovery and reconstruction operation," Tadateru Konoe, the Red Cross president, said in a statement. "It will take at least five years to rebuild, but healing the mental scars could take much longer."

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Associated Press writer Mari Yamaguchi in Fukushima and APTN videojournalist Miki Toda in Kesennuma contributed to this report.

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Japan marks three months since tsunami with protests (AFP)

TOKYO (AFP) – Thousands of people staged anti-nuclear rallies in Japan on Saturday as the country marked three months since its massive quake and tsunami, which resulted in the world's worst nuclear accident in 25 years.

Radiation continued to leak from the crippled Fukushima Daiichi nuclear power plant, some 220 kilometres (140 miles) northeast of the capital, amid simmering public frustration over the government's slow response to the triple catastrophe.

Prime Minister Naoto Kan, under heavy pressure to step down, visited part of the disaster zone where 23,500 people were killed or are still unaccounted for while 90,000 others remained holing up in crowded shelters.

In the tsunami-hit port town of Kamaishi, Kan -- who was on his way to a memorial service -- was pressed by a fishery official to pass an extra relief budget as soon as possible. "I will work hard," the premier replied.

Media reports said that around 100 anti-nuclear events were staged nationwide, including in the western cities of Osaka and Hiroshima, which was devastated by a US atomic bomb in 1945.

In the capital an estimated 6,000 demonstrators, some carrying placards reading: "We don't want nuclear power plants" marched by the head office of the Fukushima plant's operator, Tokyo Electric Power Company (TEPCO), in a rally organised online by the Japan Congress against Atomic and Nuclear Bombs.

But dozens of apparently right-wing activists, some of them holding the military rising-sun flag, jeered from the roadside condemning the calls to downgrade Japan's nuclear ambitions.

TEPCO, once the world's biggest utility, has seen its share price plunge more than 90 percent since the March 11 disaster.

A minute's silence was observed at various places nationwide at 2:46 pm (0546 GMT), the moment the 9.0-magnitude quake struck below the Pacific seafloor sending monster waves over the country's northeastern Tohoku region.

"It is time to shift to renewable energy sources," Greenpeace director Kumi Naidoo told a rally at Tokyo's Yoyogi Park before they took to the streets holding sunflowers and gerbera daisies.

"I have yet to have a child but I come here with my neighbours and their children because of the fear we feel every day," Misuzu Kiyozumi, a 34-year-old housewife from the suburban city of Ichikawa, told AFP.

The prime minister attended a meeting with leaders in Kamaishi on ways to improve survivors' lives while newspaper editorials criticised his government's handling of the calamity.

"I heard what they really need. I want to incorporate into a second supplementary budget what has not been included in our first supplementary budget," Kan told reporters after the meeting.

The mass-circulation Yomiuri Shimbun said his government's assistance to disaster-hit communities "has been insufficient."

"The removal of rubble has been overly delayed. Construction of makeshift housing for evacuees has yet to get on the right track," it said.

Rebuilding the muddy wastelands of the Tohoku region -- an area now covered in 25 million tonnes of rubble -- will take up to a decade and cost hundreds of billions of dollars, experts say.

A 20-kilometre (12-mile) no-go zone has been enforced around the Fukushima nuclear plant, which emergency crews hope to bring into stable "cold shutdown" between October and January.

Environmental and anti-nuclear group Greenpeace called on Japan this week to evacuate children and pregnant women from Fukushima town, about 60 kilometres from the stricken plant, because of what it said was high radiation.

Since the disaster, Japan has raised the legal exposure limit for people, including children, from one to 20 millisieverts per year -- matching the safety standard for nuclear industry workers in many countries.

In the wake of the disaster, Kan has said resource-poor Japan will review its energy policy, including its plans for more nuclear reactors, while making solar and other alternative energies new pillars of its energy mix.

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