Japan logs record trade deficit as energy costs surge, yen weakens

Japan recorded a trade deficit of 634.5 billion yen (approximately USD 4 billion) in July, extending a stretch of monthly deficits to three consecutive months, according to preliminary data released by the Finance Ministry on Thursday. Both import and export volumes reached record highs, yet imports outpaced exports as energy import costs climbed sharply.

Imports surged 27.8 per cent year-on-year to a seasonally adjusted 12.15 trillion yen (USD 77 billion), driven primarily by escalating crude oil prices. Japan, which sources nearly all its crude oil through imports, has faced significant supply pressures following geopolitical tensions in the Middle East. The effective closure of the Strait of Hormuz—a critical shipping chokepoint for Middle Eastern oil—has compounded energy costs for the resource-scarce nation.

Exports rose 23.2 per cent to 11.51 trillion yen (USD 73 billion), reflecting continued strength in Japan's core manufacturing sectors. Automotive exports to the United States and other markets remained robust, while shipments of semiconductors and electronic devices posted healthy gains. Japan's export sector has now expanded every month for nearly a year.

Analysts attribute the persistent trade deficit to the combination of elevated global energy prices and a weaker yen, which has increased the cost of imports while potentially supporting export competitiveness. The currency weakness reflects broader economic pressures affecting Japan's trade balance.