Japan's imports and exports reached record highs in July, according to government data, but the nation’s trade deficit widened for a third consecutive month due to climbing energy costs and a weakening yen.
The trade deficit totaled 634.5 billion yen ($4 billion) in July, the Finance Ministry reported. Imports surged 27.8% year-over-year to a seasonally adjusted 12.15 trillion yen ($77 billion), while exports grew 23.2% to 11.51 trillion yen ($73 billion). Both figures represent the highest values since comparable data became available in January 1979.
The surge in import costs is largely attributed to global energy prices, exacerbated by the conflict in Iran and its impact on oil shipments through the Strait of Hormuz. Japan, which relies heavily on imported oil, has been seeking alternative energy sources, including from the United States.
Exports, however, have shown consistent growth for nearly a year, driven by strong automobile shipments to the U.S. and other nations, alongside healthy sales of semiconductors and electronic devices.
Despite interventions by Japan's central bank to strengthen the yen, the currency remains weak against the U.S. dollar, trading at approximately 158 yen to the dollar, significantly higher than a year ago. While a weaker yen benefits Japanese exporters by increasing the value of their overseas earnings, it also makes imported goods, such as raw materials, food, and oil, more expensive.
Analysts suggest that the economic policies implemented by Prime Minister Sanae Takaichi have had limited impact on reversing the economic trend thus far. Nevertheless, her administration is expected to remain in power, with no elections currently scheduled and a relatively stable level of public approval.