Japan imports jump to record high on oil price surge, complicating BOJ policy
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TOKYO, July 22 : Japan's imports jumped to a record high in June, government data showed on Wednesday, as a weak yen and soaring oil prices drove up import costs and inflation, leaving the central bank in a policy bind.
The swelling import bill has become a growing concern for policymakers, with the yen's weakness amplifying inflationary pressures even as officials seek to safeguard a fragile economic recovery.
The Bank of Japan is widely expected to leave interest rates unchanged at next week's policy meeting. But the central bank is likely to maintain its tightening bias, as the combination of a weak currency and higher energy costs continues to fuel inflation risks.
The value of imports surged 25.4 per cent in June from a year earlier to a record 11.3 trillion yen ($69.25 billion), driven by crude oil. It exceeded a median market forecast for a 21 per cent gain and marked the fastest growth since November 2022.
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"Japan's diversification of oil procurement sources is progressing, with purchases from the United States and Russia surging, while declines in imports from the Middle East have moderated," Koki Akimoto, an economist at Daiwa Institute of Research, said.
While crude oil import volumes fell 13.7 per cent from a year earlier, the value of those purchases soared 59.3 per cent, with the yen-denominated unit cost climbing to a record high.
Even though high-level U.S.-Iran peace talks began in late June and oil prices fell, uncertainty over the conflict weighed on trade and logistics for much of the reporting period. Renewed hostilities between Iran and the U.S. in the past few weeks have further raised concerns for policymakers globally.
"While hopes had been rising among major economies for easing inflation and a recovery in growth, prolonged instability could weigh on global economic activity and increase the risk of a broader slowdown," said Takeshi Minami, chief economist at Norinchukin Research Institute.
AI BOOM HELPS DRIVE SOLID EXPORTS
Earlier this month, the BOJ said the Iran war is likely to prod more firms to raise prices later this year, signalling caution over mounting inflationary pressures that could bolster the case for further interest rate hikes.
However, the central bank also noted that strong demand tied to the global artificial intelligence boom could help sustain growth.
That confidence was underlined in the exports figures, which jumped 19.3 per cent in value terms year-on-year in June. They beat a market forecast for an 18.6 per cent increase and followed a 16.8 per cent rise in May, driven by a weak yen and strong demand tied to AI-related data centres.
Exports to the United States last month rose 13 per cent from a year earlier, helped by solid automobile demand as persistently high gasoline prices encouraged consumers to switch to more fuel-efficient hybrid vehicles.
Japan ran a trade deficit of 406.9 billion yen ($2.49 billion) in June, compared with the forecast of a deficit of 120 billion yen.
"The yen's weakness is primarily being driven by Japan's low interest rates relative to other major central banks and concerns about fiscal policy, rather than the current account balance," Daiwa's Akimoto said.
($1 = 163.1700 yen)
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