--Clyde Russell is a Reuters market analyst. The views
expressed are his own.--
By Clyde Russell
LAUNCESTON, Australia, Feb 27 Much of the focus
on "Abenomics" has been on the positive impact for Japan's
economy through a weaker yen and stimulus spending, but this
ignores the flip side of higher energy imports and costs.
Already this can been seen with Japan's January imports of
liquefied natural gas hitting a record 8.23 million tonnes,
which cost 607.7 billion yen ($6.5 billion).
If the same amount of LNG had been bought at end of October
last year, before newly-elected Prime Minister Shinzo Abe
promised about $120 billion in spending by purchasing bonds, it
would have cost 525.9 billion yen, or about 13 percent less.
The January data showed that LNG imports grew 1 percent in
volume terms, but 11.4 percent in value terms. This is because
the yen has fallen by as much as 16 percent since Abe launched
the latest plan to drag Japan from chronic recession.
Japan imported 87.31 million tonnes of LNG in 2012, and it's
likely that this figure will rise again in 2013 to somewhere
closer to 90 million tonnes.
This is largely because the nation's nuclear output remains
low, with only 2 of 50 reactors operating currently and no
further restarts likely until the third quarter at the earliest.
Progress on restarting nuclear plants will be subject to the
tug-of-war between support from Abe's government and a sceptical
public still scarred by the Fukushima disaster after the March
2011 earthquake that devastated the north of the main island of
Power demand is also likely to rise in 2013 over 2012 on the
back of reconstruction efforts after the Tohuku earthquake and
increased manufacturing from Abe's economic stimulus.
Japan is also forecasting a hotter-than-average summer this
year, which may boost power demand for air-conditioning.
Eastern Japan, which includes the densely populated capital
Tokyo, will have a 40 percent chance of higher-than-average
temperatures for the June-August period, according to the
official meteorological agency.
If LNG imports rise to 90 million tonnes, and assuming LNG
prices remain relatively constant in 2013 at around the $801 a
tonne Japan paid in January, this would mean a 2013 import bill
of around $72.1 billion.
If the yen remains around the current level of 92.02 to the
dollar, which isn't much weaker than the recent 33-month high of
94.77, then the cost of LNG imports could hit 6.63 trillion yen,
a 10 percent gain on the 2012 figure.
And it's not just LNG import costs that are likely to jump,
crude oil and coal will also be subject to the impact of yen
It's also likely that Japan will import more coal in 2013 to
meet higher electricity demand, and crude demand may rise from
the construction sector as stimulus spending ramps up.
Coal imports may jump to as much as 182.3 million tonnes in
the fiscal 2013-14 year that starts in April, according to the
Institute of Energy Economics Japan, a government-linked
This is up from 178 million tonnes the prior fiscal year,
meaning Japan could potentially import about 4.3 million tonnes
more in the year to March 2014.
Using the exchange rate from last October, the cost of 178
million tonnes of coal, assuming the $114 a tonne that the
country paid for thermal coal in January, would be about 1.62
Assuming steady dollar prices for coal, imports of 182
million tonnes and a yen-dollar rate of the current 92.02, the
2013 import bill may be around 1.9 trillion yen, a 17.5 percent
While crude demand may rise from increased construction and
manufacturing activity, this may be offset by utilities using
less fuel oil, as they are more likely to turn to coal and LNG
for power generation in preference to expensive fuel oil.
Japan imported 3.91 million barrels per day in 2012, and
assuming a steady price of $105.9 a barrel, which is what Japan
paid in January, the depreciation of the currency may add 15
percent to the import bill.
Japan's total trade deficit for last year was a record 6.927
trillion yen and it's clear that energy imports will put
significant upward pressure on that number in 2013.
Abe is no doubt hoping that the stimulus he's planning, and
the weaker yen, will boost manufacturing exports by more that
the cost of higher energy imports.
Whether he is right or not will be the real test of
(Editing by Ed Davies)