Korea’s Trade Deficit with Japan Hits 16-Year Low

Korea's trade deficit with Japan is expected to reach its lowest level in 16 years. The drop is attributed to a decrease in equipment imports by Korean semiconductor companies amid a downturn in the world semiconductor industry and a decline in petrochemical imports due to falling international oil prices.

According to the Ministry of Trade, Industry and Energy and the Korea International Trade Association on Nov. 18, Korea’s trade deficit with Japan in the first 10 months of this year was US$16.366 billion, a 20.6 percent decrease from the same period last year (US$20.614 billion).

It is the smallest deficit for the January-October period since 2003 when the deficit reached US$15.567 billion. If this trend holds, the annual trade deficit with Japan is likely to fall under US$20 billion for the first time in 16 years since 2003. That is about half of the all-time high of US$36.12 billion in 2010.

There is the possibility of Korea’s trade deficit with Japan falling in the long term due to the trade disputes between Korea and Japan. Korea has not posted a trade surplus with Japan for the past 54 years since it normalized diplomatic relations with the neighbor in 1965.

A significant decrease in imports from Japan led to a drop in Korea’s trade deficit with Japan. Until the end of October, Korea’s exports to Japan stood at US$23,746 million, a 6.5 percent decrease from the same period of last year, but Korea’s imports totaled US$40,111 million, down 12.8 percent from the same period of last year. This year, Korea’s imports from Japan are expected to fall most sharply since 14.7 percent in 2015.