Trade balance
In the last decade, Japan turned the deficit in goods and service trade on its balance of international payments (BoP) into a surplus for consecutive years, facilitated by the country’s growing export position. While the trade deficit on commercial services shrank in the last decade, merchandise remains the main component of the trade balance. Major commodities exported from Japan include durable goods such as electrical and general machinery as well as transport equipment.Meanwhile, non-durable goods make up a significant share of the import market owing to the importance of mineral fuels for the domestic energy industry. While the country reduced its dependency on fossil fuel imports through the operation of nuclear power plants, a lack of oil reserves and declining support for nuclear energy following the 2011 Great East Japan Earthquake impede further efforts.
Trade relations
Foreign relations are characterized by the importance of China and the United States as trade partners, with both nations being in a close race as the largest export market to Japan. At the same time, the East Asian partner is also the leading supplier within the import market, with machinery and manufactured goods making up the majority of trade commodities.Additionally to trade agreements with neighboring nations within the Asia Pacific region, the Japanese government entered into free trade agreements with the European Union and the United Kingdom. To broaden economic relations and diversify supply chains, the bilateral economic partnership agreements aim at liberalizing trade through gradual tariff reductions and opening up the commercial service market.
