Japan’s Oil Import Bill Soars 59% as Trade Deficit Deepens

Japan's oil import expenses surged by 58.7% last month, with imports increasing by only 3.6%. This drove the nation's total import bill up by 28% and extended its trade deficit for the fourth straight month. Analyst Koki Akimoto of Daiwa Institute of Research warned that oil import costs might rise further starting September, exacerbating the deterioration in Japan's terms of trade due to a two-month delay in higher crude prices affecting imports at Japanese ports.

The trade deficit for August stood at $7.12 billion, higher than analysts' predictions and the highest ever recorded. August's total import bill surpassed the previous record set in July, when oil import costs surged by 87.8%. Japan relies heavily on energy imports, with around 90% of its crude oil sourced from the Middle East prior to the U.S.-Israel conflict with Iran in mid-February.

In response, Japan has rapidly diversified its energy sources, purchasing crude from Nigeria, Angola, South Sudan, Azerbaijan, the U.S., and Canada, and releasing some oil reserves to maintain adequate supply. Despite these efforts, the diversification and the increasing war premium on oil prices have led to a significant rise in the energy import bill, with little prospect of relief in the near future.