Japan’s trade deficit jumps to a record level in January…what are the reasons?

The Japanese Ministry of Finance reported today, Thursday, that the country’s trade deficit reached a record level in January, in light of weak export growth, on which the Japanese economy, the third largest in the world, relies a lot.

The trade balance deficit jumped to 3.5 trillion yen (equivalent to 26 billion US dollars) in January, up from 1.45 trillion yen (equivalent to 10.77 billion US dollars) in December.

According to data from the Ministry of Finance, the trade deficit exceeded 3 trillion yen for the first time since similar data dating back to the late seventies of the last century, although the deficit was less than the estimates of economists.

We are trying here, by addressing the figures of exports and imports, to explain the reasons that prompted the deficit to record a record level, putting more pressure on the Japanese government and the Japanese Central Bank to push the economy out quickly from the current state of weakness.


The growth rate of Japanese exports declined to 3.5% in January from 11.5% in December, due to the deterioration in global demand for the Japanese technology sector, as electronic chip manufacturing equipment recorded one of the largest declines in Japan’s history.

The value of exports to China declined, dragged down by declines in shipments of autos and auto parts, and Japanese exports to the US and Europe grew at a slower-than-expected pace.


Imports to Japan increased by 17.8% in January, and the inflation of the import bill is attributed to high energy costs, in addition to the acceleration of Japanese companies’ purchases of Chinese inventories before the start of the Lunar New Year holidays in China.

global slowdown

One of the main reasons behind the high trade deficit in Japan is due to the slowdown in the global economy, and accordingly the Japanese government and the Japanese central bank will need to closely monitor the extent of the slowdown in economic growth around the world.

“There is uncertainty about how quickly Japan’s trade deficit will decrease as the global economy is expected to slow down more than current levels, and there is less pessimism about the international economic outlook,” said Takeshi Minami, chief economist at the Norinchukin Institute.

Minami said that the continuation of global central banks to tighten monetary policy will increase the damage in an even greater way to the global economy in the coming months.

Chinese demand

The increase in coronavirus cases following the end of China’s zero Covid policy disrupted economic activities across the country, which greatly affected weak demand and consumption in the country.

Japanese export operations depend on more than 50% of them on Chinese demand and demand in other Asian countries.

Japanese Yen

One of the main reasons behind the decline in Japanese exports is also the rise in the exchange rate of the Japanese yen to its highest level in eight months against the US dollar, and Japan relies heavily on the weakness of the currency to increase the export process.

The reason behind the sharp rise in yen levels was the Bank of Japan’s move to adjust the target yield curve on ten-year bonds from 0.25% to 0.50%, in the bank’s first steps to curb high inflation in the country.