TOKYO, June 20 (Xinhua) -- Japan's persistent large trade deficit has received much attention.
In fiscal 2022 ended March, Japan posted a trade deficit of 21.73 trillion yen, marking a new record. And the latest data showed that the trade deficit in May stood at 1.37 trillion yen, with the balance staying in the red for the 22nd consecutive month.
The most immediate reason that accounted for the country's huge deficit should be the external environment that changed dramatically.
First, the international commodity market has entered into a cycle of rising prices.
Since the beginning of 2021, the price of energy resources has risen rapidly due to a myriad of factors. Against this backdrop, Japan's trade surplus has shrunk with rising import prices. By August of that year, the country's imports exceeded exports, resulting in a trade deficit.
After the outbreak of the Ukraine crisis in February last year, the international commodity market prices soared further, and Japan's trade deficit widened sharply.
Second, the Bank of Japan's persistence with monetary easing has widened its policy divergence with the world's major central banks, and the Japanese currency has depreciated sharply.
For more than a year, major central banks in the United States and Europe have turned to tightening monetary policy, followed by a series of aggressive rate hikes. However, Japan was unable to raise interest rates due to its sluggish economy and other reasons.
The interest rate gap between the yen and various currencies expanded rapidly, leading to the Japanese currency's drop of more than 30 percent against the U.S. dollar from around 115 yen at the beginning of 2022 to the year's low near 152 yen in October. Soaring import prices combined with a sharp depreciation of the yen have pushed Japan's monthly trade deficit to record highs.
Third, the huge trade deficit puts further downward pressure on the yen, which is one of the reasons why it is difficult for Japan to improve its trade balance. Experts have pointed out that the continued high demand to sell yen and buy U.S. dollars has given rise to a vicious circle where yen depreciation leads to trade deficit that leads to further depreciation of yen.
At its root, structural reasons, including weak exports and dependence on imports, are also embedded in Japan's chronic trade deficit.
After the signing of the Plaza Accord in 1985, the yen appreciated substantially which eroded Japan's export competitiveness, leading to the rapid expansion of the country's serious economic bubbles. Afterwards, the burst of the bubbles, continued deflation, and the declining birthrate and aging population ushered in the long-term stagnation of Japanese economy.
The industries remaining in Japan generally lack innovation and vitality, and it is difficult to produce world-leading superior products and promote the leapfrog development of exports.
At the same time, Japan's dependence on imports remains high, and it relies heavily on imports for energy, food and raw materials.
In fiscal year 2022, the import value of fossil energy such as petroleum and natural gas exceeded 35 trillion yen, and food imports amounted to about 10 trillion yen. A Japanese finance ministry official said that Japan needs about 45 trillion yen to flow overseas just to maintain its basic survival.
At present, with the decline of energy prices in the international market, Japan's trade deficit has shown a gradual narrowing trend.
However, analysts believe that it is difficult to change the Japanese trade's structural dependence on the international market. Due to sluggish overseas demand, Japan's exports will remain under pressure in the short term, and the trade deficit is expected to continue for some time. (1 Japanese yen equals 0.0071 U.S. dollar) ■
