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Japan Records Third Straight Fiscal Year of Trade Deficit Despite Export Recovery

Despite rebounding exports, Japan registers a trade deficit for the third consecutive fiscal year, highlighting persistent economic challenges.

Global News
304
17, Apr, 2024

Jivika Chawla

@JivikaChawla

Japan Records a Trade Deficit for the Third Straight Fiscal Year Despite Recovering Exports

Amid its third consecutive fiscal year, Japan faced a persistent trade deficit, driven by escalating costs of imports, particularly energy, and a weakened yen. According to data from the Finance Ministry released on Wednesday, the deficit amounted to 5.89 trillion yen ($38 billion) for the fiscal year ending in March.

The deficit was notably pronounced in regions such as the Middle East, Saudi Arabia, and the United Arab Emirates, as well as Australia and Indonesia. However, Japan maintained a trade surplus with the United States and certain European nations.

Although annual exports to China experienced a slight decline for the first time in four years, recent monthly data indicate a resurgence, with exports to China growing by 12% compared to the previous year. Robert Carnell, regional head of research Asia-Pacific at ING Economics, attributed this growth to robust exports in the technology sector, while also observing expanding exports to other global regions.

Carnell expressed optimism, foreseeing exports as the primary driver of growth in the upcoming months. The depreciation of the Japanese yen in recent times influenced the trade balance, increasing import costs in yen terms while boosting export values when converted into yen. Notably, the U.S. dollar appreciated against the yen, trading above 150 yen recently, up from around 130 yen a year ago.

March's data, also unveiled on Wednesday, showcased Japan achieving a trade surplus of 366.5 billion yen ($2.4 billion), buoyed by a 7% growth in exports compared to the previous year, coupled with a nearly 5% decline in imports. Exports to the U.S. notably surged by over 8% in March.

The fiscal year 2023's trade deficit, while significant, was notably smaller than that of fiscal year 2022, which was impacted by the conflict in Ukraine and soaring energy prices. It closely mirrored the deficit recorded in fiscal year 2021, following a trade surplus in fiscal year 2020.

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