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April 30, 2013

Japan's Abe Focuses on Energy During Trip Overseas

by William Gallo

Analysts say securing energy deals will be a main focus of Japanese Prime Minister Shinzo Abe's week-long economic diplomacy tour of Russia and the Middle East.

Accompanied by a delegation of more than 100 Japanese business leaders, Prime Minister Abe is in the middle of a trip that includes stops in Russia, Turkey, the United Arab Emirates, and Saudi Arabia.

​​Securing cheaper energy imports is crucial for resource-starved Japan, which has struggled to recover from the loss of almost all of its nuclear energy in the wake of the 2011 disaster at the Fukushima Daiichi power plant.

Masamichi Adachi, a senior economist at J.P. Morgan in Tokyo, said this will likely be the emphasis of Abe's stops in Saudi Arabia and the UAE, which are the biggest and second-biggest providers of crude oil to Japan, respectively.

"[Abe's trip] is all related to energy. Japan is now facing big headwinds from the accident at the nuclear power plants, and that means Japan needs to import more energy. Therefore, we want more cheap energy," said Adachi.

As Japan's dependence on energy imports has risen, so have prices, creating an even greater problem for Japan's economy and negatively affecting its trade deficit.

But Adachi said Japan may have leverage to negotiate prices with energy sellers, now that the relatively inexpensive U.S. shale gas is being sold abroad.

Japanese energy officials also hope to use the trip to restore domestic and international demand for Japan's nuclear power technology, which collapsed sharply after the 2011 disaster.

An association of Japanese and French businesses are reported to be among the finalists to secure a $22 billion deal with Turkey to build a nuclear power plant on the Black Sea coast.

Adachi said such a nuclear cooperation deal, which would be the first since the Fukushima incident, would go a long way in assuring Japanese citizens that it is safe to restore Japan's nuclear reactors.

"Japanese industries want to prove that Japanese nuclear technology is safe enough so that other foreign governments can accept it. Then that means that in our country, the Japanese people can also say our technology is fine," said Adachi.

Abe's trip also has diplomatic goals.

​​On Monday, he became the first Japanese leader to visit Russia in a decade. After meeting in Moscow with President Vladimir Putin, the two leaders announced they were instructing diplomats to intensify efforts to work out a peace treaty.

The two countries did not sign a formal peace treaty at the end of World War II because of a dispute over four islands taken by advancing Soviet forces at the close of the war.

Abe is scheduled to meet with Saudi Arabian Crown Prince Salman bin Abdulaziz al-Saud on Tuesday. He will then meet with Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed al-Nahyan on Wednesday. He meets with Turkish Prime Minister Recep Tayyip Erdogan on Friday before heading home on Saturday.