Despite growing exports, Japan registers a trade deficit for the third consecutive fiscal year

For the third consecutive fiscal year, Japan had a trade deficit due to rising import and energy expenses and a weakening currency.

Data from the Finance Ministry issued on Wednesday showed that the deficit for the fiscal year that ended in March was 5.89 trillion yen (USD 38 billion).

The Middle East, namely Saudi Arabia and the United Arab Emirates, together with Australia and Indonesia, had the largest trade imbalances. Japan had a trade surplus with many European and US nations.

Although the most recent monthly data indicates that exports to China are improving and are up 12% from the previous year, annual shipments to China decreased marginally and declined for the first time in four years.

While adding that exports were also increasing to other areas, Robert Carnell, regional head of research Asia-Pacific at ING Economics, attributed the recent spike in exports to China to robust technology-related exports.

In a study, he said, “We think exports will be the main engine for growth in the coming months.”

The Japanese yen’s recent decrease in value had an impact on the trade balance since it made imports more expensive in yen and increased the value of exports when converted to yen. A year ago, the US dollar was trading at 130 yen, but it is now trading at 150 yen.

March data, which was also published on Wednesday, revealed that Japan had a trade surplus of 366.5 billion yen (US$ 2.4 billion), with exports increasing by 7% and imports falling by almost 5% from the previous year. In March, exports to the United States increased by almost 8%.

Compared to fiscal 2022, when the economy was severely impacted by the conflict in Ukraine and energy costs skyrocketed, the trade deficit for fiscal 2023 was much lower. It was about in line with the records from the fiscal year 2021. In fiscal 2020, Japan enjoyed a trade surplus.

The coronavirus pandemic-related societal constraints made it difficult to get components, especially computer processors, which hurt Japan’s exports and output. But these issues have become better over time.

In terms of goods, Japan exported electrical equipment, vehicles, and auto components but imported food. There is a growth in inbound tourism, which is considered an export numerically.