Japan experiences USD 2.34 billion trade deficit in May, shortfall narrows 42.8% YoY

Japan recorded a trade deficit of nearly USD 2.34 billion (378.6 billion yen) in May, marking the first deficit in four months, according to the government data released on Wednesday. However, the deficit of Japan in May was 42.8 per cent lower than the same month of the previous year.

The report also indicated that Japan's crude oil imports fell sharply, declining by over 57 per cent in volume amid the ongoing West Asia conflict. Meanwhile, exports significantly surged 17.0 per cent to 9.51 trillion yen on robust demand for semiconductor and other electronic parts, including motor vehicles.

The Finance Ministry of Japan stated that imports have risen 12.5 per cent from a year earlier to 9.89 trillion yen, on purchases of communication devices. On the other hand, the data revealed that the oil import of Japan plunged 57.3 per cent to 4.73 million kilolitres as the West Asia conflict disrupted shipping through the Strait of Hormuz.

Japan's alternative ways during conflicts

In response, Japan has stepped up efforts to secure fuel from alternative suppliers, including the United States, after U.S.-Israeli strikes on Iran that began on February 28 effectively shut down the key maritime route. Imports of U.S. crude oil rose 24.0 per cent to 576,000 kilolitres. Earlier this week, the Bank of Japan (BOJ) increased its short-term policy rate from 0.75 per cent to 1.0 per cent, marking its highest level since 1995. The decision was approved by a 7-1 vote of the Policy Board and took effect on Wednesday.

The interest rate on the complementary deposit facility, which applies to current account balances held by financial institutions excluding required reserves, was raised to 1.0 per cent. Meanwhile, the basic loan rate under the complementary lending facility remained unchanged at 1.25 per cent.