Last month, Japan's trade imbalance reached 2.2 trillion yen (USD 19 billion), an eight-year record, as the cost of energy imports surged, according to the government. Exports increased 9.6% in January compared to the same month the previous year, according to the Finance Ministry. Imports increased by 39.6%, resulting in a trade deficit for the sixth month in a row, according to the report.
The imbalance is at its highest level since January 2014, when it reached over 2.8 trillion yen. Because of the New Year's holidays, the trade imbalance tends to expand in January, according to Koya Miyamae, a senior economist at SMBC Nikko Securities. “But even taking that into consideration, the deficit is huge,” he said.
Almost all of Japan's oil and gas is imported. Prices have recently risen to multi-year highs, raising global inflation concerns. Tensions in Ukraine have driven prices further higher due to fears of a Russian invasion. Meanwhile, as the Federal Reserve prepares to boost interest rates to combat inflation, Japan's currency, the yen, has depreciated versus the dollar. Higher interest rates tend to strengthen the dollar against other currencies by increasing demand for dollar-denominated investments.
Exports have not kept pace with imports, since shortages of computer chips caused by pandemic-related disruptions in some nations have hampered the production of electronics and automobiles.