Japan Oil Imports Fall to Lowest Since 1988 as Demand Drops

(Bloomberg) -- Japan’s crude oil imports last year fell to the lowest level since 1988 as demand weakens amid a declining population and more efficient vehicles.

The world’s third-biggest economy imported 195.5 million kiloliters of oil, or about 3.37 million barrels a day in 2015, a 2.3 percent drop from the previous year, according to preliminary data from the Ministry of Finance on Monday. That’s the lowest since 1988 when the nation imported 192.2 million kiloliters, data from the ministry shows.

Japan’s oil-product demand peaked in fiscal year 1999 and has been in decline as the populace shrinks and as auto manufacturers build more fuel efficient vehicles, forcing refiners to cut capacity and consolidate. Lower crude prices, waning inflation expectations and a reversal in the yen’s declines have added pressure on the Bank of Japan to expand its already-record stimulus program even as cheaper commodities have helped narrow Japan’s trade deficit.

“A drop in crude prices is a negative factor for the Bank of Japan to achieve its two percent inflation target,” Bob Takai, president of Sumitomo Corporation Global Research Co., said by phone. “For BOJ Governor Kuroda, it is most desirable that crude prices are stabilized. A decline in oil prices is not bad for the whole economy but the speed has been too drastic.”

Japan bought about 82 percent of its total oil imports from the Middle East last year, 1.2 percentage points less than a year earlier, according to the Ministry of Finance. Meanwhile, Russia increased its share by 0.7 percentage points to 8.8 percent in 2015, according to the data.

Trade Deficit

Brent crude, the benchmark for more than half the world’s oil, fell 35 percent last year as the Organization of Petroleum Exporting Countries effectively abandoned production limits to defend market share.

Japan paid about 8.18 trillion yen ($69 billion) for crude in 2015, down 41 percent from a year earlier, according to the Ministry of Finance data. Japan’s bill for LNG dropped 29.5 percent to 5.54 trillion yen. The country’s annual trade deficit last year narrowed almost 80 percent from a record as energy import costs fell and the weaker yen helped spur a modest increase in exports.

LNG shipments fell 3.9 percent to 85 million metric tons last year, the first decline since 2009. Thermal coal imports rose 4.8 percent to a record 114 million tons, according to ministry data going back to 1988.

Demand for fuels like gasoline and diesel is forecast to fall by an average 1.3 percent annually through the year ending March 2020, the Ministry of Economy, Trade and Industry said in April.

Japan’s population has dropped the past seven years and last year fell to 126.9 million, the lowest since 2000, according to an estimate from the U.S. Census Bureau.

To contact the reporters on this story: Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net; Stephen Stapczynski in Tokyo at sstapczynsk1@bloomberg.net; Emi Urabe in Tokyo at eurabe@bloomberg.net To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net; Ramsey Al-Rikabi at ralrikabi@bloomberg.net Aaron Clark, Sungwoo Park