January 25, 2023

Japan ran its biggest annual trade deficit of ¥19.97 trillion ($155.27 billion) in 2022, as higher energy and raw material prices along with the yen’s precipitous fall boosted import costs, government data showed Thursday, offsetting growth in exports as the impact of the COVID-19 pandemic waned.

The value of imports jumped 39.2% to a record ¥118.16 trillion, led by crude oil, coal and liquefied natural gas, while exports grew 18.2% to ¥98.19 trillion, also a record high, due to increased shipments of cars and steel, the Finance Ministry said in a preliminary report.

However, the trade imbalance for the month of December alone decreased more than anticipated, indicating that the effects of the weak yen and high energy prices have started to lessen.

Previously, the nation’s greatest annual deficit was the 12.82 trillion reported in 2014 deficit. In 1979, comparable data became accessible.

The record red ink highlights Japan’s fragility as a country with limited resources that must rely on imports to meet domestic requirements.

The agony was made worse by the yen’s decline in value versus the dollar, which reached its lowest point in more than three decades. This decreased national wealth. In 2022, the dollar’s average value was 13.77, up 19.5% over the previous year.

A weak yen benefits both importers and exporters, increasing both their foreign profits and the value of their imports. Japanese officials intervened in the currency market to stop the depreciation after becoming alarmed by the yen’s sharp decline versus the dollar, which was caused by the Bank of Japan and the U.S. Federal Reserve’s different monetary policies.

Russia’s war in Ukraine, which caused supply concerns, was partially to blame for 2022’s higher energy and raw material prices.

Assisted by robust exports of automobiles and machinery, Japan saw its trade surplus with the United States increase for the second consecutive year to 6.54 trillion. Shipments to the United States jumped by 23.1% to total 18.26 trillion, while imports, driven primarily by pharmaceuticals, rose by 31.5% to 11.72 trillion.

China’s rigorous “zero-COVID” policy appears to have hurt trade with Japan, causing the country’s trade deficit to more than treble to 5.83 trillion yen.

With the aid of apparel, smartphones, and electronic parts, imports increased by 21.8% to 24.83 trillion yen. Only 5.7% more goods were exported, totaling 19.01 trillion.

With the rest of Asia, including China, Japan’s trade surplus decreased to 2.08 trillion yen, or about a third of its 2021 level. With the European Union, the country recorded a 2.02 trillion yen trade deficit, continuing an 11-year trend.

Source: Japan Times
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