Japan’s trade deficit nearly doubles to $17.8 billion on energy costs
Japan posted a trade deficit of $17.8 billion for April to September, almost double the shortfall a year earlier, as the closure of the Strait of Hormuz pushed up the cost of oil and gas imports.
Finance Ministry data released on Wednesday showed exports rising 18.4% over the six-month period, while imports climbed 20.4%, widening the trade gap to 2.82 trillion yen.
The imbalance stemmed largely from energy. Petroleum import volumes fell 21.2% from a year earlier, yet their value jumped 26.3% because of higher prices. Petroleum product imports dropped 26.8% in volume but still cost 23.2% more. Liquefied natural gas (LNG) volumes fell 8.4%, while their value rose 13.5%.
The disruption traces back to the closure of the Strait of Hormuz after the outbreak of the Iran war, which cut off a route that had carried more than 90% of Japan’s crude imports. Freight and insurance costs also climbed as shipments were rerouted.
Japan, a major LNG importer, cut back gas-fired power generation in favor of coal this summer as LNG prices stayed high. The government has released crude from strategic reserves as part of an International Energy Agency (IEA)-coordinated effort to put 400 million barrels of crude and oil products onto the market.
Earlier this month, Japan’s government approved three bills aimed at diversifying oil supply sources and strengthening energy security, including grants to offset importers’ higher shipping costs for crude sourced outside the Middle East.
Why it matters for markets: A wider Japanese trade deficit driven by costlier energy imports can weigh on the yen and add to import-driven inflation pressure, with knock-on effects for USD/JPY and energy markets including Brent crude and LNG, as Japan’s scramble for alternative crude supply and strategic reserve releases influence global oil availability.
Source: OilPrice.com