## Japan's Trade Deficit Persists for Third Year
Japan's trade deficit continued for the third consecutive fiscal year, driven by rising energy and import costs coupled with a weakened yen. The deficit reached 5.89 trillion yen ($38 billion) for the fiscal year ending in March, according to Finance Ministry data.
The largest trade deficits were observed with Middle Eastern countries, particularly Saudi Arabia and the United Arab Emirates, as well as Australia and Indonesia. Conversely, Japan maintained a trade surplus with the US and some European nations.
Annual exports to China experienced a slight decline, marking the first drop in four years. However, recent monthly data indicates a recovery, with exports to China growing 12% year-on-year. Robert Carnell, regional head of research Asia-Pacific at ING Economics, attributes this jump to strong technology-related exports.
The weakening yen significantly impacted the trade balance, increasing import costs in yen and boosting the value of exports when converted. The US dollar currently trades above 150 yen, compared to 130 yen a year ago.
March data revealed a trade surplus of 366.5 billion yen ($2.4 billion), with exports growing 7% year-on-year and imports declining nearly 5%. Notably, exports to the US increased by over 8% in March.
While the fiscal 2023 trade deficit was considerably smaller than the previous year, it remained comparable to fiscal 2021. Japan had enjoyed a trade surplus in fiscal 2020.
Social restrictions imposed during the pandemic hampered the procurement of components like computer chips, affecting Japan's production and exports. However, these challenges have gradually eased.
Japan's import composition primarily consisted of food, while exports were dominated by automobiles, auto parts, and electrical machinery. Additionally, inbound tourism, statistically classified as an export, is experiencing a boom.