Japan Oil Import Bill Surges Amid Rising Global Tensions

Japan's oil import bill has risen sharply in recent months, driven by increased costs and a trade deficit at its highest level on record. According to reports, Japan's oil import bill rose 58.7% year over year last month, while import volumes grew by only 3.6%. This sharp cost increase lifted the country's total import bill by 28%, extending its trade deficit for a fourth consecutive month.

Koki Akimoto, an analyst at Daiwa Institute of Research, warned that oil import costs could rise further from September onward, which would worsen Japan's terms of trade. He attributed this risk to a two-month lag before higher crude prices show up in imports reaching Japanese ports.

Japan relies heavily on energy imports, with as much as 90% of its crude oil coming from the Middle East before the U.S.-Israel war with Iran began at the end of February. Since then, Japan has moved to diversify its sources, purchasing crude from Nigeria, Angola, South Sudan, Azerbaijan, the United States, and Canada.

The country's efforts to diversify have been driven by a rising war premium on oil prices, which has driven up its energy import bill. With little prospect of relief in the near term, Japan's trade deficit is expected to remain high.