Japan delved into a trade deficit in the previous month, primarily due to a decline in exports, particularly towards other Asian countries.

Last month, Japan experienced a trade deficit as exports witnessed their first decline in two years and five months, influenced by a global economic slowdown.

In the preceding month, Japan faced a trade deficit as exports experienced their first decline in over two years, primarily due to a deceleration in overseas economic activity.

According to the Finance Ministry's announcement on Thursday, Japan's trade deficit amounted to 78.7 billion yen ($539 million), marking the first negative trade balance for the world's third-largest economy in two months.

Exports showed the most significant contraction in the broader Asian region, encompassing countries like China, Singapore, and Taiwan, with a decrease of 0.3% compared to the same month in the previous year, totaling 8.73 trillion yen ($60 billion).

Exports rebounded in the automobile and auto parts sector as the production constraints resulting from COVID-19-related lockdowns gradually eased.

However, this resurgence wasn't sufficient to counterbalance the decline in exports of computer products, computer chips, machinery, and other manufactured goods.

Imports experienced a decline across multiple sectors, encompassing food, machinery, and energy, registering a 13.5% decrease compared to the previous year, amounting to 8.8 trillion yen ($60 billion), as reported by the ministry.

The decline in imports affected not only Asia but also various other countries, including the United States, Mexico, nations in the Middle East, and even Russia.

Although July's trade deficit was still notably smaller than that of the same month in the previous year, roughly constituting half of the previous year's deficit.

Import expenses surged during the past year, driven by soaring fuel prices and the depreciation of the Japanese yen. This depreciation amplifies the value of overseas expenditures when converted into yen.

The yen's persistent weakness remains evident, with recent trading at approximately 146 yen per U.S. dollar. This is likely to sustain concerns regarding the strength of Japan's economic recovery.

A critical determinant for Japan hinges on the extent of China's economic rebound from the pandemic-induced damage. Some analysts express uncertainty about the stability of China's recovery.

This relatively pessimistic outlook for Japan's trade trajectory follows a glimmer of positive news earlier this week, as the government announced a 6% annual growth rate for Japan's economy in the April-June period. This marked the third consecutive quarter of growth, attributed to recovering exports and increased inbound tourism.

The trade surplus Japan achieved in June had sparked optimism that the economy might be on the path to recovery from the strains of the coronavirus pandemic.

"I sense that the decline in exports to China is more pronounced than the global decline, even though they are interconnected. We must also assess the potential influence of U.S.-China tensions on trade," remarked Sayuri Shirai, a professor of policy management at Keio University, in a commentary published in the Nikkei newspaper.