Japan recorded a ¥2.82 trillion trade deficit in the first half of fiscal 2026. Exports reached a record ¥63.46 trillion and rose 18.4% from a year earlier, but imports increased faster, by 20.4% to ¥66.28 trillion. Higher oil costs outweighed the benefit of stronger shipments of vehicles, machinery and electronic components.
The figures show why rising exports do not necessarily improve the position of an energy-importing economy. If a country sells more manufactured goods but pays much more for every unit of imported fuel, part of the additional export income is transferred to commodity suppliers. Domestic transport, power and manufacturing costs rise at the same time.
Japan imported less oil but paid more for it
Preliminary Ministry of Finance data show that Japan’s oil import volume fell 21.2% year on year between April and September. The value of those imports nevertheless increased 26.3% to ¥5.74 trillion. The price effect was therefore much larger than the savings from lower physical purchases.
The trade balance measures the value of cargo at the border, not only the number of barrels. When dollar oil prices rise while the yen weakens, the importer faces two sources of inflation: each barrel costs more dollars, and each dollar requires more yen.
September was the fifth consecutive month with a trade deficit, at ¥536.6 billion. Monthly balances can move sharply with shipment timing, but the half-year result indicates a broader deterioration in Japan’s terms of trade.
Low energy self-sufficiency magnifies the shock
Japan’s Agency for Natural Resources and Energy put the country’s energy self-sufficiency rate at 16.4% in fiscal 2024. Japan remains heavily dependent on imported oil, coal and liquefied natural gas. A disruption in the Middle East therefore affects not only refineries but also the cost of chemicals, plastics, freight and electricity.
Inventories reduce the risk of a physical shortage. In February 2026, public and commercial oil stocks were equivalent to roughly eight months of consumption. A stockpile does not eliminate the price shock, however. Releasing reserves can support supply and buy time, but it cannot restore the global price or the exchange rate.
Diversifying suppliers also has a cost. An alternative source may be farther away, require more expensive shipping or provide a crude grade that is less suitable for a particular refinery. Procurement decisions must account for plant configuration as well as the headline oil price.
A weak yen helps exporters and hurts domestic buyers
Currency depreciation increases the yen value of exporters’ dollar revenue if they maintain sales volume. That can support the profits of vehicle, machinery and electronics manufacturers. The benefit is uneven, because companies that also import energy and materials surrender part of the currency gain through higher costs.
Households experience the other side of the adjustment. Costlier fuel, utilities and transport reduce real income if wages grow more slowly. Consumption can weaken even when large exporters report strong results. Record exports are therefore not the same as broad-based economic strength.
Companies’ pricing power determines where the cost lands. A producer with a scarce product or strong brand can raise prices. A low-margin supplier facing intense competition is more likely to absorb the increase. The same energy shock can lift consumer inflation while weakening the balance sheets of less powerful firms.
The Bank of Japan faces a difficult policy mix
Since 24 September, the Bank of Japan has guided the overnight call rate at around 1.25%. A higher rate can support the yen and reduce imported inflation, but it also raises borrowing costs for households and companies. Monetary policy cannot increase oil supply, so it cannot remove the source of the shock quickly.
Fiscal support creates the opposite trade-off. Energy subsidies or tax cuts can reduce the immediate bill for consumers, but shift part of the cost to the government. Broad support is expensive because it also benefits households and companies that can absorb the increase.
A durable improvement in the trade balance will depend on three variables: imported energy prices, the yen and exporters’ ability to preserve revenue without aggressive price cuts. Strong exports remain an important advantage, but they do not automatically offset an external energy shock.
Sources
- Japan Ministry of Finance — April-September 2026 trade statistics.
- Bank of Japan — current policy-rate guidance.
- Japan Agency for Natural Resources and Energy — energy self-sufficiency.
- Japan Agency for Natural Resources and Energy — oil-stock estimate.