Japan's May Shortfall.
Japan Logs First Trade Deficit in Four Months Amid Surging Imports and High Energy Costs.
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Key Points
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Japan paid record-high prices for crude oil in May—114,076 yen per kiloliter (+67.2% year on year) and $114.6 per barrel (+52%)—and officials said the “high” levels likely reflected changes in shipping routes.
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While Japan posted a May deficit for the first time in four months, it actually represented a swing down from an April surplus: the deficit of 378.6 billion yen was down from a 301.9 billion yen surplus in April.
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Japan’s shift to alternative crude suppliers is partly offsetting Middle East disruptions: crude oil imports from the United States rose 24.0% to 576,000 kiloliters, with sourcing from Malaysia and Brunei also increasing, the report said.
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The Strait of Hormuz disruption tied to the Iran conflict is described as severe: “A fifth of the world’s oil” passed through the strait until Feb. 28, when U.S. and Israeli attacks on Iran began—contributing to a 1.8% year-on-year fall in Japan’s oil and gas imports.
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The yen pressure is quantified: the U.S. dollar was trading around 160 yen in recent days, compared with about 140 yen a year earlier—helping explain why imports remain costly despite the higher rate environment.
Japan fell into a $2.4 billion trade deficit in May, its first shortfall in four months, as a record surge in crude oil prices and a weak yen drove import costs sharply higher. The deficit came in at 378.6 billion yen, reversing an April surplus of 301.9 billion yen, according to Ministry of Finance Japan.
Exports grew a strong 17% to 9.51 trillion yen, lifted by semiconductor shipments to China and car sales to the United States. But imports climbed 12.5% to 9.89 trillion yen, pushed up by record oil prices and a yen trading near 160 per dollar — far weaker than the 140-yen level a year ago, India's News reported.
Hormuz Conflict Sends Crude Oil Prices to Record Highs
Japan paid 114,076 yen per kiloliter for crude oil in May — up 67.2% from a year earlier and the highest price on record. In dollar terms, that works out to $114.6 per barrel, a 52% jump. Officials said the "high" price levels likely reflected changes in shipping routes, according to QNA.
The price spike traces directly to the Strait of Hormuz. Until February 28, roughly one-fifth of the world's oil passed through that waterway. Then U.S. and Israeli forces struck Iran, turning the strait into a combat zone. Japan's crude oil import volumes collapsed 57% as Middle East supply dried up, according to World Infonasional.
Japan Races to Replace Middle East Oil With New Suppliers
Japan traditionally gets about 90% of its crude from the Middle East. With that supply chain broken, it is buying oil from wherever it can. Imports from the United States rose 24% to 576,000 kiloliters in May. Sourcing from Malaysia and Brunei also increased, according to QNA.
The switch is expensive. Ships rerouting around the Cape of Good Hope — instead of through the Strait of Hormuz — add weeks of transit time and millions in fuel costs. Analysts warn these higher logistics costs will squeeze corporate profits and push consumer prices up, India's News reported.
AI Boom Drives a 31.5% Surge in Tech Imports
Not all import growth came from energy. Imports of electrical machinery — computer chips and related components — jumped 31.5% in May. The driver is artificial intelligence. Global AI investment is creating massive demand for semiconductors, and Japan needs to import more chip parts to keep its factories running, according to Guru Focus.
Japan is on both sides of this trade. It exports finished high-tech goods, including semiconductors, to China. But it must first import the raw components to make them. That two-way flow boosted overall trade volumes — even as the energy crisis widened the deficit, Seeking Alpha noted.
Bank of Japan Rate Hike Has Not Yet Strengthened the Yen
The Bank of Japan raised its short-term interest rate to 1.0% in June — the highest level since 1995. The goal was partly to strengthen the yen and lower import costs. But the yen has not recovered. It still trades around 160 per dollar, compared with about 140 a year ago, according to World Infonasional.
That weak yen makes every import more expensive in yen terms — even when cargo volumes fall. Some analysts say geopolitical risk is overwhelming the rate hike's effect. If oil stays near $114 a barrel and the yen holds at 160, Japan's trade deficit is likely to widen further in June, Guru Focus reported.
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