Reduction in Japan’s trade deficit due to fuel

Japan’s trade deficit shrank for the second month last March, following a fall in the price of fuel and lower import costs.

For its part, Japan’s Ministry of Finance reported that the trade deficit shrank to 754.5 billion yen ($5.6 billion) from 898.1 billion yen in February. Economists had projected a deficit of 1.29 trillion yen.

Imports grew 7.3% from a year ago, the lowest gain in two years, as higher yen and lower commodity prices including oil curbed import costs. Exports rose 4.3% from the previous year led by the automotive sector.

Japan’s deficit was smaller than the previous month; However, it extended for the twentieth month and is seen to affect the country’s recovery prospects. The Bank of Japan is holding a monetary policy meeting next week, the first under Governor Kazuo Ueda, with mounting questions and speculation about when to adjust highly facilitative monetary policy.

Bank of Japan officials are concerned about changing or eliminating yield control incentives shortly after the overseas banking crisis, according to people familiar with the matter.

The latest data also comes amid concerns about the global economic slowdown.

March exports to the United States rose 9.4%, the weakest level since October 2021, while shipments to the European Union grew 5.1%, the lowest level since February 2021. Economists said Japan’s exports could slow further in the coming months as borrowing costs rise.