Key facts
- Japan's oil import bill increased by 58.7% year-on-year in August.
- The volume of oil imported by Japan rose by 3.6% in August.
- Japan's total import bill for August was 28% higher than a year earlier.
- The country recorded a trade deficit of $7.12 billion in August.
- This marks the fourth consecutive month of trade deficit for Japan.
- Analysts predict further increases in oil import costs due to rising crude prices and geopolitical tensions.
Japan's oil import bill surged by 58.7% year-on-year in August, significantly outpacing a more modest 3.6% rise in import volumes. This sharp increase in costs contributed to a 28% jump in the country's total import bill, extending its trade deficit for the fourth consecutive month to a record $7.12 billion. Analysts at Daiwa Institute of Research predict that oil import costs could rise further from September onward, potentially worsening Japan's terms of trade due to a lag in reflecting higher crude prices in imported shipments. The ongoing escalation in the Persian Gulf and the extension of fighting to the Red Sea, with Houthi attacks targeting Saudi energy infrastructure, are expected to keep oil prices elevated. Japan, heavily reliant on energy imports, with about 90% of its crude oil previously sourced from the Middle East, has been diversifying its energy suppliers to countries like Nigeria, Angola, South Sudan, Azerbaijan, the United States, and Canada. The country has also utilized oil inventory releases to ensure supply. However, this diversification, coupled with rising war premiums on oil, has led to the swelling of its energy import bill.