Weaker Yen Increases the Urgency to Restore Japan’s Nuclear Energy

A set of policies in Japan known as “Abenomics” is making a return to nuclear power ever more pressing. The LDP is expected to push hard to restart plants if it wins a crucial election for the upper house of parliament this summer. Mr Abe’s focus on the economy has given greater say to the voice of business, including the big utilities whose plants are idle. Smaller firms clamor for cheaper power too.

Japan’s broader economic future may be at stake. The trade deficit widened to 8.2 trillion yen ($83 billion) for the fiscal year 2012, nearly double the gap of 4.4 trillion yen in 2011, after decades of surplus. This leads to worries about the overall current-account balance; its deterioration could affect Japan’s ability to keep funding its huge public debt domestically. A big cause is the cost of energy imported to fill the gap left by nuclear power. A weaker yen, the result of the central bank’s radical loosening of monetary policy, is further pushing up the price of imported oil and gas.

Having to import expensive resources is complicating the economic strategy of a race to the bottom for the valuation of their currency.

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