Increase in Japan’s trade balance deficit is caused by a weak yen

In October, there was an increase in Japan’s trade balance deficit because of a rapid growth of import costs, which, in turn, was driven by a record fall in the yen. Cumulatively, these factors have had a detrimental impact on the country’s economy.

Japan’s trade balance has remained negative for 15 months already. According to the Finance Ministry’s data, the deficit grew from 2.09 to 2.16 trillion yen, or to $15.5 billion, in October, which significantly exceeded analysts’ expectations of 1.62 trillion yen.

As Bloomberg stated, the country’s prolonged trade deficit demonstrates a fragile state of its economy, attempting to recover since the pandemic. Unexpected results of the third quarter affected this unstable state again along with the weak yen, which has shown some growth this month, but in general continues to have a negative impact on the country’s economy.

Takeshi Minami, economist at Norinchukin Research Institute, outlined that the trade imbalance in Japan was inevitable, given the combination of such factors as the weak yen and rising commodity prices. Also, he didn’t exclude the possibility of another national currency depreciation, which might result in a greater increase in the country’s trade balance deficit.