Japan records a trade deficit as oil imports soar because of conflict in the Middle East

 Japan's trade deficit reached 2.81 trillion yen ($17.8 billion) for the first fiscal half, according to government data released Wednesday, as the war in Iran sent oil import prices soaring.

The Finance Ministry's preliminary data showed that Japan's exports for the April-September period grew 18.4% from the same period the previous year to 63.5 trillion yen, while imports soared to 66.3 trillion yen, up 20.4% year-over-year. Both were record highs for Japan. The soaring price of oil affects a wide range of sectors, including plastic goods and shipping costs.

Resource-poor Japan imports virtually all its oil and has relied on access to the Strait of Hormuz in the Middle East for its oil shipments. That's now basically blocked, and Japan has had to pay more to get shipments from other routes. Brent crude, the international standard, has soared from $70 a barrel in February to around $110 a barrel. Analysts say prices are unlikely to ease soon. For the month of September, Japan's trade deficit totaled 536.6 billion yen, marking the fifth month of deficits, down from 1.1 trillion yen in August.

Japan's September imports grew 18.9% from the previous year, while exports rose 16.7%. One sore point is the weakening yen, which drives up the cost of imports. The U.S. dollar is lately trading at 150-yen levels. The central bank, which kept borrowing costs at below or near zero for years to help keep a shaky economy going, has been gradually raising interest rates, in part to prop up the yen. Last month, the Bank of Japan raised the benchmark interest rate to 1.25% from 1.0%, a 31-year high. Its monetary policy board meets again next week. The bank has an inflation target of about 2%.

The Japanese government has repeatedly stressed it's working closely with the Bank of Japan. The government of Prime Minister Sanae Takaichi is promising a tax cut on food to 1% from 8% to help lower-income families cope with soaring prices. That bill is now being debated in Parliament.

Associated Press