By Megumi Fujikawa
TOKYO--Japan's exports and imports continued to rise in March but the trade outlook for the months ahead remains clouded by war in the Middle East.
Exports climbed 11.7% on the year last month, extending the streak of gains to a seventh straight month, government data showed Wednesday. That beat both February's 4.0% rise and the 11% increase forecast in a poll of economists by data provider LSEG.
Imports grew 10.9%, slightly higher than February's 10.3% increase.
However, since the U.S.-Israel war against Iran only started in late February, the March data has yet to capture the impact of disruptions to energy and other key commodities Japan imports from the Middle East.
Japan relies on the region for the vast majority of its oil and is vulnerable to disruptions to shipping routes connected to the Strait of Hormuz, a key waterway that has been effectively shuttered by the conflict.
In the short term, Japan's total import bill will likely remain roughly flat as supply constraints limit volumes and worsening consumer sentiment triggered by high energy prices caps demand, said Mizuho Securities economist Yasuhisa Irie.
Norinchukin Research Institute economist Takeshi Minami expects the consequences of energy shortages to start becoming more apparent in April.
"While the [Japanese] government has begun releasing crude oil reserves and claims to have secured alternative procurement routes that do not rely on the Strait of Hormuz, a prolonged blockade would likely lead to a visible economic contraction in emerging markets with smaller oil reserves," Minami said.
That is expected to hurt Japan's economy in multiple ways, including by slowing economic activity and fueling inflationary pressures, he added.
Disruptions to the flow of energy and other key commodities are also eating into corporate profits as shortages drive up costs for Japanese companies. That could ultimately weigh on the country's economic recovery.
As rising energy prices risk accelerating overall inflation, flight-to-safety demand for the dollar is adding to the yen's weakness, further increasing Japan's import bill.
Against that backdrop, the Bank of Japan is widely expected to keep its policy rate at 0.75% at its next meeting on Tuesday as it gauges geopolitical risks in considering when to tighten again.
Write to Megumi Fujikawa at megumi.fujikawa@wsj.com
(END) Dow Jones Newswires
04-21-26 2239ET
