Higher energy prices coupled with a sharp drop in the value of the yen pushed Japan’s trade deficit last month to a record $19.7 billion.
August was the thirteenth month in a row that Japan has been importing more than it has been exporting. About half of the deficit came from energy imports from the Middle East, the AP reported, citing government data.
"The weaker yen is boosting (the cost of) imports at a time of surging energy prices. Energy and grain prices have shown signs of stabilizing recently, but the impact of the sharp drop in the yen will continue for a while with a lag," one analyst told Japanese daily Mainichi.
"Imports are on the rise as high raw material prices continued and supply disruptions eased, while exports are sluggish," a Japanese economist told Reuters.
"Costs will rise if imports go up without any change to the size of the global economy. It will lead to the importing of inflation," Takeshi Minami, chief economist at Norinchukin Research Institute, also said.
Japan is one of the biggest energy importers in the world because of the local scarcity of energy resources. Until recently, it was the world’s biggest LNG importer but last year surrendered the number-one spot to China.
The country is also one of the world’s biggest oil importers, with the Middle Eastern members of OPEC its most prominent suppliers. After Russia’s invasion of Ukraine, Japan began reducing its imports from Russia, previously its fifth-largest supplier. By July, Japan was importing 98 percent of its oil from members of the Gulf Cooperation Council.
Despite being a member of the G7, which recently agreed a price cap on Russian oil exports in an effort to reduce Russia’s revenues from energy exports, Japan has been exempt from the cap and continues importing oil and gas from Russia.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
- UK Puts A Cap On Household Energy Bills
- China Could Ease Europe’s Diesel Shortage
- Another European Steel Plant Scales Back Amid Ongoing Energy Crisis