Japan Posts $17.8 Billion Trade Deficit for April-September as Oil Import Costs Surge

Japan imports almost all of its oil, and the bill just got bigger.

The Finance Ministry's preliminary data, released today, Oct. 21, shows a trade deficit of 2.81 trillion yen ($17.8 billion) for the April-September fiscal half. Imports hit a record 66.3 trillion yen, up 20.4% from a year earlier. Exports also set a record at 63.5 trillion yen, up 18.4%.

Imports grew faster than exports. That gap is the deficit.

The oil bill

Japan has relied on the Strait of Hormuz for its oil shipments. The waterway is now effectively blocked because of the war in Iran, and Japan is paying more to bring in crude by other routes.

Brent crude, the international benchmark, was about $70 a barrel in February. It has topped $110 in recent months. Reuters reported Brent at $106.06 a barrel today, up 37 cents. Analysts say prices are unlikely to ease soon, and Morgan Stanley has said the global fuel market will stay tight through mid-2027.

Higher oil costs don't stay at the pump. The soaring price of oil affects a wide range of sectors, including plastic goods and shipping.

September: smaller, but still red

September's deficit was 536.6 billion yen. That is the fifth straight monthly deficit, though well below August's 1.1 trillion yen.

September imports rose 18.9% from a year earlier, while exports rose 16.7%.

A weak yen makes it worse

The dollar is trading around 150 yen. A weaker yen means Japan pays more in local currency for every dollar-priced barrel it buys.

The Bank of Japan kept borrowing costs at or near zero for years to prop up a shaky economy. It has been raising rates gradually, in part to support the yen. Last month it lifted its benchmark rate to 1.25% from 1.0%, a 31-year high. Its inflation target is about 2%.

The central bank's policy board meets again next week.

What Tokyo says it is doing

The Japanese government has repeatedly said it is working closely with the Bank of Japan. Prime Minister Sanae Takaichi's government is also promising a food tax cut, from 8% to 1%, to help lower-income families cope with soaring prices.

That bill is being debated in Parliament now.

What the numbers show

Japan's exports are growing at a record pace, so this is not a collapse in sales abroad. The deficit comes from an import bill swollen by energy prices and a weak currency. A country that buys nearly all its oil abroad has little room to maneuver when a single chokepoint closes.

The food tax cut would reduce what the government collects at the register while it also tries to defend the yen. Next week's Bank of Japan meeting will show whether policymakers raise rates again with the currency near 150 and Brent above $100.