April 21, 2023
TOKYO – Japan logged a trade deficit of ¥21.73 trillion in fiscal 2022, the highest on record since comparable data became available in fiscal 1979, according to the Finance Ministry’s provisional figures announced Thursday.
Imports rose due to soaring prices for resources following Russia’s invasion of Ukraine and the yen’s weakness against the dollar and other currencies. The deficit far exceeded the previous record of ¥13.76 trillion in fiscal 2013.
The nation’s trade was in the red for the second straight fiscal year after logging a ¥5.59 trillion deficit in fiscal 2021.
In the just completed April 2022 through March 2023 fiscal year, imports increased 32.2% from the previous year to ¥120.96 trillion, and exports increased 15.5% to ¥99.23 trillion, both the highest ever, but the growth in import value was significant.
Among imports, the value of energy-related items showed the largest growth. Petroleum mainly from the Middle East rose 70.8% to ¥13.69 trillion, coal increased 139.5% to ¥8.58 trillion and liquefied natural gas increased 77.6% to ¥8.89 trillion.
Imports of items ranging from foodstuff to electrical machinery and chemicals also increased by more than 20% from the previous year.
In addition to high resource prices and rapid global inflation, the accelerated weakening of the yen also influenced trade figures. More than 70% of imports to Japan are settled in U.S. dollars, and the average exchange rate in fiscal 2022 was about ¥135 to the dollar, meaning the yen was ¥23 weaker than the U.S. dollar the previous fiscal year.
Due to this, the import unit price of petroleum increased 32.5% in dollar terms with no exchange impact, while that in yen terms was up 59.9% from fiscal 2021.
Exports of automobiles to the U.S. and other markets, however, rose 28% to ¥13.74 trillion, and exports of steel to Mexico and elsewhere rose 15.1% to ¥4.76 trillion. Especially for automobiles, exports increased thanks to the easing of supply constraints on semiconductors and other necessary items in the second half of the fiscal year and strong demand overseas.
The trade balance for March, which was announced on the same day, incurred a deficit of ¥754.5 billion, the 20th consecutive month in the red. The figure was the smallest in fiscal 2022, lower than February’s ¥898.1 billion.
Make most of weak yen
Japan’s record trade deficit shows the country’s heavy reliance on resources from overseas.
High resource prices and the weak yen have pushed up the value of imports, underscoring the deficit. This indicates the need to work on reducing Japan’s dependence on imports of resources and other goods.
Looking at imports by category, mineral fuels, such as petroleum and liquefied natural gas, pushed up the total growth by more than half.
Amid high resource prices, the use of thermal power generation, which relies almost entirely on imported fuels, has had a significant impact. This has also put a burden on households and businesses through electricity bills.
The yen’s weakness has undeniably pushed up the value of imports in many dollar-settled import transactions. Meanwhile, it has provided a tailwind leading to the increase in the number of foreign visitors to Japan and the brisk performance of exporting firms, a factor increasing wages.
As resource prices have remained high, Japan shouldn’t just look at the negative aspects of a weak currency, but rather should devise ways to make the most of the yen’s weakness.