Japan Posts ¥2.81 Trillion Trade Deficit as Middle East Conflict Lifts Oil Costs

Japan's trade deficit for the April-September fiscal half came in at 2.81 trillion yen ($17.8 billion), the Finance Ministry said Wednesday in preliminary data, as oil import costs climbed amid conflict in the Middle East. Exports for the period rose 18.4% from a year earlier to 63.5 trillion yen, while imports jumped 20.4% to 66.3 trillion yen. Both figures were record highs for Japan, according to the Independent, which reported the data.

The rising cost of crude ripples across the economy, feeding into prices for plastic goods and shipping, the report noted. Japan, which has few natural resources, imports virtually all of its oil and has depended on the Strait of Hormuz for shipments — a route the Independent described as now basically blocked, forcing the country to pay more for alternatives. Brent crude has climbed from about $70 a barrel in February to roughly $100 lately, after exceeding $110 a barrel in recent months, and analysts cited in the report said prices are unlikely to ease soon.

For September alone, Japan's trade deficit was 536.6 billion yen — its fifth consecutive monthly shortfall, though narrower than the 1.1 trillion yen recorded in August. September imports grew 18.9% year-over-year while exports rose 16.7%.

A weakening yen has added to the pressure by making imports more expensive, with the dollar recently trading around the 150-yen level. The Bank of Japan, which held borrowing costs at or near zero for years to support a fragile economy, has been gradually raising rates partly to bolster the currency. Last month it lifted its benchmark rate to 1.25% from 1.0%, a 31-year high, and its monetary policy board meets again next week. The central bank targets inflation of about 2%.

The government has repeatedly said it is working closely with the Bank of Japan. Prime Minister Sanae Takaichi's administration is proposing to cut the tax on food to 1% from 8% to help lower-income households cope with rising prices, and the bill is now being debated in Parliament.