Japan Record Trade Deficit in August on Rise in Energy Imports

Japan's trade deficit widened more than expected to a record high in August, driven by higher energy import costs as the yen hovered at 24-year lows, data showed on Thursday.

The country's trade deficit widened to 2.82 trillion yen ($1.97 billion) in August, nearly double last month's 1.43 trillion yen, provisional data from the Finance Ministry showed. Economists had expected a deficit of 2.40 trillion yen. Exports rose 22.1% this month, below expectations, while imports beat expectations and grew by nearly 50% compared to last year. This was largely due to weakness in the yen, which hit a 24-year low at the end of August and has hovered near that level ever since. Energy imports continued to be the biggest driver of Japan's trade deficit, rising nearly 32% in August on higher liquid natural gas and coal prices. The country is trying to address its energy shortage by importing large amounts of electricity-generating fuel. Russia's invasion of Ukraine was the biggest contributor to the rise in fuel prices, given that Moscow is one of the world's largest suppliers of natural gas. However, plans to restart nuclear reactors in Japan could solve this problem by early 2023. Weakness in the yen has further increased the cost of Japan's imports. The currency is among the worst performing Asian currencies this year, largely due to the Bank of Japan's reluctance to raise interest rates. The fall in the yen has prompted several ministers to issue verbal warnings about potential intervention in currency markets. But no clear action has been taken so far. Japan's economic outlook has also darkened for the rest of the year, with headwinds from rising inflation starting to weigh on corporate profits and household spending. Still, the country's economy grew more than expected in the second quarter. Follow Global Economic Developments on Social Media! Click here to follow Ieconomy official Facebook account! Click here to follow Ieconomy official Instagram account! Click here to follow Ieconomy official Twitter account!