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Japan’s trade deficit soared to 21.72 tn yen (~$160 bn) in FY22*, the highest since FY13, as per data released by the country’s finance ministry on Thursday. Additionally, imports amounted to 120.95 tn (~$0.89 tn), increasing by 32% year on year in FY22. Exports spiked by 15.9% to reach a total of 99.23 tn yen (~$0.73 tn) during the same period.
Both the import and export figures are the highest since records began in 1979. Also, this is the second year in a row that the country has posted a trade deficit following a 5.59 tn yen (~$41 bn) deficit in FY21.
As per the Japanese government, a 44% increase in imports of mineral fuels like petroleum, LNG and coal led to a rise in the country’s imports in FY22. During the same period, the average value of Japanese currency as compared to the US dollar depreciated from 111.91 yen to 135.05 yen, leading to rising import costs.
Along with that, a gain in Japanese exports was fueled by the exports of motor vehicles and iron and steel, which increased year over year by 28% and 15.1%, respectively. “Growth through exports is important for companies and the Japanese economy. It will continue to be important,” Chief Cabinet Secretary Hirokazu Matsuno stated at a press conference on Thursday.
Matsuno claimed that trends in crude oil prices as well as domestic and international economic conditions will have an impact on the increase in Japan’s trade deficit in the future. “I would like to continue to keep a close eye on it,” he added.
Japan trade deficit with China reaches fresh high
Meanwhile, Japan’s trade deficit with China reached a record high of 6.81 tn yen (~$0.05 tn) in FY22. Exports to the country amounted to 18.51 tn yen (~$0.14 tn), a 1.3% year on year increase. Compared to this, the imports from China swelled by 19.6% to 25.33 tn yen (~$0.19 bn) during the same period.
Furthermore, Japan recorded a trade deficit with the EU for 11 years in a row, with a deficit of 1.77 tn yen (~$13.16 bn) in FY22. However, the country recorded a trade surplus of 6.65 tn yen (~$49.44 bn) with the US and 454.24 bn yen (~$3.37 bn) with the rest of Asia.
Besides, Japan witnessed a fiscal deficit of 5.16 tn yen (~$38.36 bn) in the first three months of 2023, a 51.9% rise from the previous year. Just in March 2023, Japan’s trade deficit grew by 61% from last year to 754.51 bn yen (~$5.61 bn). Imports and exports in March grew at a rate of 7.3% and 4.3% respectively.
“The trade deficit narrowed modestly in March for a second month as imports (7.3% YoY) grew at a slower pace than the previous month (8.3%), mainly due to favourable currency effects and falling commodity prices. The March trade figures were slightly better than market consensus, but the trend of slowing exports has continued,” said ING in an insight.
“That said, given the US’s IRA act is expected to negatively affect Japanese automakers along with softening demand in the US, we believe that exports will likely turn negative in the coming months,” it added.
*Japan fiscal year: April 1 – March 31
