Japan's Trade Deficit Widens in July as Commodity Imports Bite

By Ambar Warrick

Investing.com-- Japan logged a trade deficit for a 12th consecutive month in July, data showed on Wednesday, as pressure from its dependence on commodity imports offset a jump in exports.

A drop in the yen- which slumped to near record lows in July- also impacted the country’s trade balance.

Japan’s trade deficit widened to 1.44 trillion yen ($10.74 billion) from 1.39 trillion yen in the prior month, according to data from the Finance Ministry. The figure was also above estimates of 1.41 trillion yen.

Imports to the country surged by a bigger-than-expected 47.2% in July, with fuels- petroleum, coal, and liquefied natural gas- accounting for the biggest share of imports. This offset a bigger-than-expected 19% jump in exports.

Manufactured goods, including automobiles and electronics, were Japan’s top exports in July. The country has seen a mild recovery in industrial output, which has largely driven strength in its exports this year.

But the wider trade deficit points to more pressure on Japan’s economy this year, especially from a rising fuel bill. Japan depends heavily on fuel and food imports, and was adversely impacted by economic shocks from the Russia-Ukraine conflict this year.

A drop in the yen- which came close to record lows in July- has also increased the cost of Japan’s imports.

But recent weakness in the U.S. dollar, on signs that inflation may have peaked in the country, benefited the yen in August. The currency has recovered nearly 5% from lows hit in July. A fall in oil prices is also set to benefit Japan by lowering its massive fuel bill.

Still, uncertainty over the global economic outlook is likely to weigh on Japan’s economy in the coming months.