Japan’s Trade Gap Widens as oil Imports Surge Amid Middle East Turmoil

Preliminary figures from the Finance Ministry revealed Japan’s exports for the April-September period rose 18.4% from the same period a year earlier to 63.5 trillion yen while imports jumped to 66.3 trillion yen, up 20.4% on year. They were both record highs for Japan. Oil prices are soaring across many sectors, including plastic goods and shipping costs.

Japan is resource-poor and imports almost all of its oil. It is dependent on access to the Strait of Hormuz in the Middle East for its oil supplies. That is now effectively shut and Japan has forced to pay more for goods from alternative channels. Brent crude, the international benchmark, has surged from about $ 70 a barrel in February to about $ 110 a barrel, But analysts predict prices are unlikely to ease soon. Japan’s trade deficit widened to 536.6 billion yen in September, the fifth consecutive month of deficits, compared with 1.1 trillion yen in August.

Japan’s September imports jumped 18.9% from a year earlier, while exports increased 16.7%. A major problem is the sliding yen, which is driving up import prices. The dollar is now trading at the 150 yen level. The central bank has been gradually raising interest rates partly to prop up the yen, after years of keeping borrowing costs at or near zero to sustain a weak economy. The Bank of Japan this month lifted its benchmark interest rate to 1.25% from 1.0%, the highest level for 31 years. Its monetary policy board is set to meet again next week. The bank is targeting inflation of roughly 2%.

The Japanese government has said repeatedly it is working closely with the central bank. Prime Minister Sanae Takaichi’s cabinet has promised to cut the food tax from 8% to 1% io help low-income households cope with rising costs. That Bill is now under discussion in Parliament.

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