Japan reports record trade deficit due to expensive oil

Japan reported a trade deficit of 634.5 billion yen, or about 4 billion dollars, in July. This is the third consecutive month in which the value of imports has exceeded exports, it reports, citing preliminary data from the Japanese Ministry of Finance.

The weakening of the Japanese yen and higher oil delivery costs have led to a record import value. Both imports and exports reached their highest levels since comparable statistics began in January 1979.

Imports grew by 27.8% year-on-year to 12.15 trillion yen, with higher crude oil prices being the main driver. The price increase also boosted the value of imported semiconductors, other electronic components, and non-ferrous metals.

Exports from Japan rose by 23.2% to 11.51 trillion yen. This is the strongest annual growth rate since October 2022. The main contributions came from car shipments to the United States, as well as exports of semiconductors and other electronics to China.

A significant reason for the rise in import costs is the changes in oil shipments following the disruption of shipping through the Strait of Hormuz. The disruptions began after US-Israeli strikes against Iran in late February.

The volume of imported crude oil increased by 5.5% compared to a year earlier, reaching 12.11 million kiloliters. This is the first increase in the last four months and a return of import volumes to approximately the levels before the start of the conflict.

At the same time, shipments from the Middle East continue to decline. They have fallen by 32.8% to 7.18 million kiloliters. Before the conflict, Japan received over 90% of its oil imports from this very region.

Conversely, crude oil imports from the United States have increased more than ninefold, reaching 4.39 million kiloliters.

However, diversifying supplies is associated with significantly higher costs due to longer transport routes. The value of oil imports jumped by 87.8% to 1.41 trillion yen. The price of one kiloliter of imported crude oil increased by 78% to 116,380 yen.

Trade with the United States also saw a significant expansion. Japanese exports to the US market grew by 22% to 2.1 trillion yen, while imports from the US jumped by 58% to 1.81 trillion yen.

As a result, Japan's trade surplus in its relationship with the United States has shrunk for the eighth consecutive month.

Japan remains in a trade deficit with China for the 64th consecutive month. Exports to the Chinese market increased by 25.8% to 2.01 trillion yen, and imports grew by 26.2% to 2.78 trillion yen.

Both exports and imports in Japan's trade with the United States and China reached their highest values since comparable statistics began in 1979.