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Rise in import costs over supply chain woes expands Japan's trade gap

Rise in import costs over supply chain woes expands Japan's trade gap
Rise in import costs over supply chain woes expands Japan's trade gap

Japan is reportedly experiencing rampant inflation in its import bill as global commodity prices rise, elevating the country's cost-of-living expenses.

Although Japan's exports rose twofold for three consecutive months ending in April, the global crisis has driven the yen to a two-decade low against the dollar, fueling additional concerns about the terms of future trade.

Because of the financial burden, manufacturers have shifted to offshore manufacturing, resulting in smaller international shipments, which is hurting the export-led economy. According to reports, exports in Japan surged by 12.5% in April compared to the previous year, although falling short of economists' predictions of a 13.8% increase.

However, with supply chain activities stymied by COVID-19 in Shanghai, exports to China, which is Japan's biggest trading partner, fell 5.9% in April.

Experts presume that Japan will end up losing purchasing power as crude oil prices continue to soar and with the yen experiencing its worst low, this could lead to a handover of the country’s national wealth to the oil-producing countries.

Notably, the imports reached a record high of USD 69.27 billion, outstripping exports amounting to around USD 62 billion, culminating in a USD 6.54 billion trade deficit. Financial analysts have cautioned of the risks of cost-push inflation, which is likely to continue due to external factors, inevitably resulting in high import bills.

Even so, the highly unstable set of data, which is viewed as the main determinant of capital expenditure for the next six to nine months, offered a beacon of hope for a domestic demand-led repair. Interestingly, Japan's economy contracted over the first quarter as COVID-19 limitations clobbered the service industry and soaring commodities prices introduced new burdens.

The takeaway is that the recovery of Japan's economy is now completely reliant on Coronavirus evolutions both within the country as well as in China.

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Vinisha Joshi

Vinisha Joshi

Despite graduating with an engineering degree in electronics and communication, Vinisha Joshi chose the road less travelled, and decided to pursue her career in content writing . Currently, she pens down articles for and a few other distinguished news platforms, pertaining to business and finance.