In the fiscal year that ended in March 2024, Japan recorded a trade deficit for the third straight year. The deficit was 5.89 trillion yen (approximately $38 billion), according to data released by the Japanese Finance Ministry.
The trade deficit was largely driven by rising costs for energy and other imports, as well as a persistently weak Japanese yen. The biggest deficits were in trade with the Middle East, particularly Saudi Arabia and the United Arab Emirates (UAE), as well as with Australia and Indonesia. Conversely, Japan maintained a trade surplus with the United States (U.S.) and some European countries.
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Exports to China declined slightly on an annual basis, marking the first decrease in four years. However, more recent monthly data show exports to China recovering, with a 12 percent year-over-year increase in the latest period.
According to ING Economics‘ regional head of research for Asia-Pacific, Robert Carnell, the jump in exports to China was driven by strong performance in technology-related products. Carnell also noted that exports were growing to other regions as well, and he expects exports to be the primary engine of growth in the coming months.
Weakening yen impacts trade balance
The weakening of the Japanese yen, which has traded above 150 yen per U.S. dollar recently, up from around 130 yen a year ago, has affected the trade balance. The yen’s decline has made imports more expensive and boosted the value of exports when converted to yen.
In March 2024, Japan recorded a trade surplus of 366.5 billion yen (approximately $2.4 billion), as exports grew 7 percent year-over-year while imports declined by nearly 5 percent. Exports to the United States in March also grew by more than 8 percent.
The fiscal 2023 trade deficit was much smaller than the previous year, when the economy was impacted by the war in Ukraine and soaring energy prices. The latest deficit was about the same as the one recorded in fiscal 2021, while Japan had a trade surplus in fiscal 2020.
By product category, Japan’s imports were dominated by food, while its exports consisted mainly of autos, auto parts, and electrical machinery. Additionally, the boom in inbound tourism has contributed to Japan’s trade balance, as it is counted statistically as an export.
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