Japan’s trade deficit shrinks sharply to $21b in H1

Japan’s trade balance rebounded in June, marking the first surplus in three months and signaling a potential recovery in exports, according to government data released on Thursday.

The country’s trade deficit for the first half of this year decreased by over half compared to the same period last year, reaching 3.23 trillion yen ($21 billion), according to Finance Ministry data.

The yen’s depreciation against the US dollar has contributed to increased exports, with the trade surplus in June expanding five times to 224 billion yen ($1.4 billion) driven by higher exports of vehicles and computer chips.

The weak yen has a negative impact on Japan’s imports, particularly with inflation and increasing energy costs.

Japan has been experiencing trade deficits for six consecutive fiscal half-years since the second half of 2021 due to the weak yen and higher global prices. Japan’s fiscal year spans from April to March.

In June, imports rose modestly by three per cent to 8.98 trillion yen ($58 billion), while exports climbed by five per cent to 9.2 trillion yen ($59 billion).

During the first half of the year, imports rose by 0.8 per cent to 54.7 trillion yen ($350 billion), while exports surged by almost nine per cent to 51.5 trillion yen ($330 billion).

Economists at SMBC Nikko Securities, including Koya Miyamae, predict a further decline in Japan’s trade deficit. They point to rising exports to the US and Asia, with European markets lagging behind.

The US dollar has been steadily rising this year, reaching 160-yen levels recently and trading at about 156 yen on Thursday. While a weak yen reduces Japan’s purchasing power, it increases the value of overseas earnings when converted into yen.

Attribution: AP