Japan has reported a trade deficit for the third consecutive fiscal year, amounting to 5.89 trillion yen ($38 billion) for the fiscal year ending in March. This deficit was primarily driven by the increasing costs of energy and other imports, coupled with the persistent weakness of the yen.
The largest trade deficits were observed in the Middle East, particularly with countries like Saudi Arabia and the United Arab Emirates, as well as with Australia and Indonesia. However, Japan maintained a trade surplus with the United States and certain European nations.
While annual exports to China experienced a slight decline for the first time in four years, recent monthly data indicated a recovery with exports to China growing by 12% compared to the previous year. This growth was attributed to strong technology-related exports, which also contributed to increasing exports to other regions.
Experts predict that exports will be the primary driver of growth in the upcoming months, with a notable impact from the recent depreciation of the Japanese yen. The yen's decline has led to higher import costs in yen terms and boosted the value of exports when converted back to yen. The exchange rate against the U.S. dollar has risen to above 150 yen, up from around 130 yen a year ago.
In March, Japan recorded a trade surplus of 366.5 billion yen ($2.4 billion), with exports growing by 7% year-on-year and imports decreasing by nearly 5%. Exports to the U.S. saw a growth of over 8% during the same period.
Compared to the previous fiscal year, the trade deficit in fiscal 2023 was significantly smaller, largely due to the impact of the war in Ukraine and surging energy prices in fiscal 2022. The deficit was on par with the figures from fiscal 2021, which saw Japan holding a trade surplus.
The challenges posed by the COVID-19 pandemic, including restrictions and supply chain disruptions, affected Japan's production and exports, particularly in securing parts such as computer chips. However, these issues have gradually alleviated over time.
Product-wise, Japan imported food items while exporting automobiles, auto parts, and electrical machinery. Additionally, the country's inbound tourism sector has been thriving, contributing positively to the export figures.
