Japan's trade deficit continued to widen in June as imports surged higher than exports.
This situation was driven by two main factors, namely the weakening yen and rising world oil prices following the renewed conflict in Iran.
Japan's Ministry of Finance reported that the trade deficit reached 406.9 billion yen, much higher than analysts' expectations of around 120 billion yen. Financial market report
Throughout June, Japan's import value increased 25.4% compared to the same period last year, while exports also grew by 19.3%.
Although exports still recorded strong growth, the increase in import costs occurred at a faster rate.
This caused the gap between import and export values to widen, thus putting pressure on the country's economy.
The conflict in Iran also had a major impact on Japan's energy supply. Previously, Japan relied heavily on Middle Eastern countries for oil supplies.
However, to reduce the risk of supply disruptions, the country is now increasing its oil purchases from the United States.
The value of oil imports from the US has jumped by almost 900%, while total imports have increased by around 460%. Even so, higher oil prices have caused the total value of Japan's oil imports to still increase by almost 60%.
In addition, the weakening yen has worsened the situation. The average yen value in June was around 159.69 yen per US dollar, which is almost 11% weaker than a year ago.
When the yen depreciates, the cost of buying raw materials and goods from abroad becomes more expensive.
Although this situation gives an advantage to exporting companies because Japanese products become cheaper in the international market, the increase in import costs is still greater than the benefits received.
At the same time, Japanese exports continue to be supported by high demand for artificial intelligence (AI) chips, semiconductors, vehicles and metals.
However, economists expect Japan's trade deficit to continue to widen if oil prices remain high and the yen continues to weaken. This situation is expected to put pressure on Japan's economic growth in the second quarter of this year.
