Japan’s Oil Import Bill Soars 59% as Trade Deficit Deepens

Japan’s oil import bill surged by 58.7% on the year last month, with volumes rising by a much more modest 3.6%. This pushed the country’s total import bill 28% higher and extended its trade deficit for the fourth month in a row.

“Oil import costs could increase further from September onward, leading to a further deterioration in Japan’s terms of trade, given the roughly two-month lag before higher crude prices are reflected in imports arriving at Japanese ports,” Daiwa Institute of Research analyst Koki Akimoto said, as quoted by Reuters.

Oil import costs for Japan will inevitably increase further this month as oil prices climb on the latest escalation in the Persian Gulf and the extension of the fighting to the Red Sea, with Yemen’s Houthis stepping up their attacks against Saudi energy infrastructure.

For August, Japan booked a trade deficit of $7.12 billion. This was slightly higher than what analysts had predicted and the highest on record. With regard to the country’s total import bill for August, forecasters had seen it rising 26.3% in August from a year earlier.

Total imports for August broke the previous record set in July, when the country’s oil import bill jumped by as much as 87.8%, breaking the previous month’s record. Japan is heavily dependent on energy imports, with as much as 90% of its crude oil coming from the Middle East before the U.S.-Israel war with Iran began at the end of February.

Since then, Japan has moved to diversify urgently, buying crude from Nigeria, Angola, South Sudan, Azerbaijan, the United States, and Canada. The country has also made a series of releases from oil inventories to ensure adequate supply. The diversification, along with the rising war premium on oil prices, has caused the swelling in its energy import bill, with little chance of relief on the horizon.

By Irina Slav for Oilprice.com

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