By Leika Kihara

TOKYO, Reuters – Japan’s December current account deficit was the highest in over a year due to rising fuel prices, data from Tuesday showed. This is a clear sign of how global commodity inflation has been affecting the country’s economy.

This data shows that Japan is shifting from being a nation that made its wealth through exports of goods, to becoming more vulnerable to fluctuations in raw material prices due to increased reliance on imports and energy.

According to government data, the third largest economy in the world had a deficit of 370.8 billion Japanese yen (3.2 billion dollars) in December. This was contrary to market expectations for a surplus of 73.5 billion. The deficit was the first since June 2020.

In December of last year, rising fuel prices drove up imports value by 44.8%. That was more than an 18.7% increase in exports. The result: a 318.7 trillion yen trade deficit.

Japan’s increasing energy costs could lead to more complaints from the public about a weakening yen. This can further increase import prices.

Masato Kanda, Japan’s chief currency diplomat, stated that a weak yen has “the demerits” of pushing up energy and food import costs. This causes households to be more burdened as well as corporate costs.

The total current account surplus for Japan in 2021 was 15.4 trillion yen. This is 2.8% less than the previous year, largely due to higher energy prices.

A steady increase in overseas investment returns offset the decline in trade surplus, driving Japan’s income surplus up by 1.2 trillion to 20.4 trillion.

Japan once earned surplus goods exports. This structure is now one in which Japan benefits from investment flows,” SMBC Nikko Securities stated in a research paper.