Japan Posts Fourth Straight Trade Deficit as Oil Import Costs Surge
Japan's trade deficit widened to 1.1 trillion yen in August, the fourth consecutive monthly shortfall, as oil import costs soared amid Middle East conflicts.
Japan recorded a trade deficit of 1.1 trillion yen ($7 billion) last month, marking the fourth consecutive month in the red, as rising oil prices tied to Middle East conflicts pushed up import costs, preliminary Finance Ministry data showed Wednesday.
The resource-poor nation imports virtually all of its oil, much of it previously shipped through the Strait of Hormuz, where traffic has been curtailed by the stalemated Iran war.
Imports climbed 28% from a year earlier to 11.15 trillion yen ($71.9 billion), reflecting the surge in crude costs. Exports rose 19.3% to 10 trillion yen ($64.5 billion), led by computer chips and automobiles.
By destination, exports to the United States grew 24.9% year-on-year, while imports from the U.S. jumped 55.2%. Exports to the Middle East fell 5.2%, with imports from the region down 4.2%. Shipments to Europe edged up 11%, while imports from Europe gained 20.4%.
Brent crude has climbed from the upper $60s per barrel a year ago to more than $100, peaking at $118 in April.
Attention now turns to interest rate decisions in both Japan and the United States. Treasury Secretary Scott Bessent made remarks widely interpreted as encouraging Japan's central bank to raise rates, a move that would bolster the yen. The yen has recently weakened against the dollar, though it briefly gained following joint U.S.-Japan intervention. The dollar is trading around 155 yen, with some analysts expecting it to slip to about or below 150 later this year.
The Bank of Japan meets later this week, with markets already pricing in a hike to 1.25% from the current 1%. A stronger yen would ease the burden of importing oil, food and raw materials, but would hurt major exporters such as Toyota Motor Corp. by reducing the yen value of overseas sales.
Prime Minister Sanae Takaichi has promised increased government spending and a cut in the consumption tax on food. Meanwhile, the U.S. Federal Reserve is widely expected to raise its short-term rate Wednesday for the first time in three years to combat stubborn inflation.