Japan records trade deficit as global prices pushes imports higher

FILE – Cars for export are loaded onto a cargo ship at a port in Yokohama, near Tokyo on Nov. 2, 2021. (AP Photo/Koji Sasahara, File)

TOKYO — Japan racked up a 621 billion yen ($4.3 billion) trade deficit in July, as prices of imports surged, according to government data released Wednesday.

Japan’s imports grew nearly 17% from a year ago to 10.2 trillion yen ($70.6 billion), while exports grew 10% to 9.6 trillion yen ($66 billion), the Finance Ministry said.

Imports grew in meat and other food, as well as iron, underlining a relatively healthy domestic economy, where consumer spending improved amid rising wages.

READ: Japan’s trade deficit for first half declines as exports recover

Exports grew to the U.S., China and Brazil, but auto exports continued to suffer amid a scandal involving falsified testing that stalled production at some manufacturers, including Japan’s top automaker Toyota Motor Corp.

Earlier, auto production was hit from parts shortages caused by production disruptions from the coronavirus pandemic.

Japan’s exports in July grew from a year ago in plastic, paper products and computer parts.

“Exports slightly missed the market consensus, but showed a robust acceleration, suggesting the economy is in recovery,” said Robert Carnell, regional head of Research Asia-Pacific at ING Economics.

“It is also encouraging to note that exports grew across all major categories. Technology exports were particularly strong.”

Although Japan recorded a trade surplus in June, the world’s fourth largest economy has consistently been in the red in trade data, logging trade deficits for six straight fiscal half-years, starting with the final half of 2021. Japan’s fiscal year runs from April to March.

READ: Japan records a trade deficit for the third straight fiscal year

July’s data showed a reversal from the perk observed in June. The weak yen works as a negative for Japan’s imports, especially amid inflationary trends and rising global costs, including energy prices.

Resource-poor Japan imports almost all its energy. Energy prices are volatile recently because of uncertainty in the Middle East, and the ceasefire talks on Gaza are critical.

Daisuke Karakama, chief market economist at Mizuho Bank, believes the trade deficit reflects not only a weakening yen but also new trends like Japanese people’s spending on overseas digital streaming services. He noted, in a recent interview with Japan’s Economist magazine, that more dealers are seeking to sell yen, not buy it.

The U.S. dollar rose earlier this year to 160-yen levels, but has settled recently, trading at about 145 yen Wednesday.

Currency fluctuations, like those that gyrated wildly in recent weeks, are caused by a variety of factors. Still, much of the focus is centered around the upcoming moves from the U.S. Federal Reserve and the Bank of Japan. The Fed is expected to further cut rates, as soon as next month, while Japan’s central bank is looking to gradually raise them after keeping them extremely low for years.