Japan's Trade Deficit Narrows, but Remains Persistent due to...| MENAFN.COM

Tuesday, 21 March 2023 04:53 GMT

Japan's Trade Deficit Narrows, but Remains Persistent due to COVID-19, Economic Challenges

(MENAFN) Japan's trade deficit reached 897.7 billion yen (USD6.8 billion) in February, indicating that the country continues to grapple with the impact of the COVID-19 pandemic amid high commodity prices and a weaker currency. Although the figure was a significant improvement from January's record gap of 3.5 trillion yen (USD26.4 billion), it was still an increase from 711.5 billion yen (USD5.4 billion) in February 2022, according to data released by the Finance Ministry on Thursday. This marks the 19th consecutive month of a trade shortfall, the longest period since 2015.

The increase in Japan's trade deficit is attributed to the rise in imports, which increased by 8.3 percent from a year ago in February, but at the slowest pace since March 2021. Meanwhile, exports rose at the softest rate in the last two years, up 6.5 percent thanks to strong outbound shipment of cars. Japanese exports to the US increased 14.9 percent year-on-year, and to Europe by 18.6 percent in February, while those to China dropped 10.9 percent.

The persistent trade deficit reflects the challenges faced by the Japanese economy, including the impact of the COVID-19 pandemic and high commodity prices, as well as a weaker currency. While the narrowing of the trade deficit is a positive sign, it remains to be seen how sustainable this trend will be in the long term. Japan's economy has also been impacted by supply chain disruptions and labor shortages, which have affected the manufacturing sector.

The Japanese government has implemented various measures to support the economy, including fiscal stimulus and monetary easing. However, the country is facing a difficult economic environment and needs to address long-term structural issues to achieve sustainable growth. This includes promoting innovation, increasing productivity, and addressing demographic challenges such as an aging population and declining birth rate. As Japan continues to navigate these challenges, the performance of its trade balance will remain a key indicator of its economic health.


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