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Soaring Energy Imports Put Japan’s Economy Under Pressure

Crude oil imports into Japan soared by almost 100 percent last month, pushing the resource-poor country's trade balance deeper into deficit territory.

The increase in oil imports also paled compared to natural gas and coal imports. Japan's imports of gas, in the form of LNG, skyrocketed by 151.6 percent in April, while coal imports doubled, Mainichi reported.

As a result of these increases, Japan's trade deficit widened to some $6.6 billion, government data also showed. This makes April the ninth consecutive month of trade deficits for one of the world's largest economies.

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"Import gains caused by rising crude oil prices and a weak yen mean a transfer of national wealth to oil-producing nations, depriving Japan of purchasing power," the chief economist of Norinchukin Research Institute, Takeshi Minami, told Reuters.

"As such, Japan's economic recovery depends on coronavirus developments at home and China as the lockdown in Shanghai has disrupted supply-side and consumer activity," he added.

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Japan is heavily dependent on energy imports, which has made it difficult for it to follow the lead of its Western partners in their punitive action against Russia. While the Japanese government has condemned Russia's invasion of Ukraine and agreed to ban Russian oil imports "in principle", the actual suspension of these imports will not be easy to implement.

"For a country heavily dependent on energy imports, it's a very difficult decision. But G7 coordination is most important at a time like now," Prime Minister Fumio Kishida said at a G7 meeting earlier this month, as quoted by Reuters.

"As for the timing of the reduction or stoppage of (Russian) oil imports, we will consider it while gauging the actual situation," he added. "We will take our time to take steps towards a phase-out."

As of 2021, Russia accounted for 4 percent of Japan's crude oil imports and 9 percent of its natural gas imports.

By Charles Kennedy for Oilprice.com

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