By Ambar Warrick
Investing.com-- Japan’s trade deficit widened more than expected to a record high in August, data showed on Thursday, driven by the increasing cost of energy imports as the yen hovered around 24-year lows.
The country’s trade deficit widened to 2.82 trillion yen ($1.97 billion) in August, provisional data from the Ministry of Finance showed, nearly doubling from last month’s reading of 1.43 trillion yen. Economists were expecting a deficit of 2.40 trillion yen.
Exports grew a less-than-expected 22.1% in the month, while imports blazed past expectations to grow at nearly 50% from last year. This was largely driven by weakness in the yen, which sank to a 24-year low in late-August, and has hovered near that low ever since.
Energy imports continued to be the biggest driver of Japan’s trade deficit, jumping nearly 32% in August amid rising liquid natural gas and coal prices. The country is struggling to stave off an energy shortage by importing high amounts of electricity-generating fuels.
Russia’s invasion of Ukraine was the biggest contributor to the rise in fuel prices, given that Moscow is one of the world’s largest suppliers of natural gas.
But plans to restart several Japanese nuclear reactors, in response to a brewing shortage, may remedy this by early-2023.
Weakness in the yen has further exacerbated the cost of Japan’s imports. The currency is among the worst-performing Asian units this year, dented largely by the Bank of Japan’s reluctance to hike interest rates.
The drop in the yen has driven verbal warnings from several ministers on potential intervention in currency markets. But no clear measures have been enacted so far.
Japan’s economic outlook has also dimmed for the remainder of the year, with headwinds from rising inflation set to weigh on corporate profits and household spending.
Still, the country’s economy grew more than expected in the second quarter.