In 2011, Japan recorded its first full-year trade deficit since 1980. The three main factors responsible were the Great East Japan Earthquake, the slowdown in global demand and the increase in commodity prices. However, the appreciation of the yen during the year had a net positive effect on the trade balance. This Focus attempts to quantify the effect of each of the four factors and assess whether they will be temporary or permanent. We conclude that trade deficits are here to stay.
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