The 412 billion yen ($3.2 billion) deficit for March was lower than the previous month’s 670 billion yen, but was four times analysts’ estimates and a reversal of the 615 billion yen surplus recorded a year earlier for the world’s third largest economy.

The weaker yen helps make Japanese exports more competitive overseas and increases profits when converted from dollars to yen, but it also increases costs for both consumers and businesses.

Japanese Finance Minister Shunichi Suzuki and other leaders have expressed concern over the dollar’s steep rise, saying sharp changes in exchange rates heighten business risks.

Previously, there were fears that the dollar could hit the 130 yen level by the end of the year, Richard Katz, editor of The Oriental Economist, said in a commentary.

But “the specter of an uncontrollable yen flight is ringing alarm bells in Tokyo,” Katz said.

Suzuki was due to meet with U.S. Treasury Secretary Janet Yellen this week and discuss currency issues, though it’s unclear what Washington might do as the Fed struggles to rein in inflation.

The Japanese yen weakened against the dollar as the Federal Reserve began raising interest rates to curb inflation which is at its highest level in 40 years. Higher rates attract investors who buy dollars and sell other currencies, such as the yen.

Despite rising import prices, Japan’s central bank has held its key rate at minus 0.1% for years, trying to pull the economy out of the doldrums as the country ages and its population shrinks.

Top financial leaders from the Group of 20 industrialized economies are due to meet in Washington on Wednesday on the sidelines of meetings of the International Monetary Fund and the World Bank.

“The government will communicate closely with the United States and other monetary authorities and respond appropriately,” Japan’s Chief Cabinet Secretary Hirokazu Matsuno told reporters.

“We would like to monitor the level of the currency with a sense of urgency,” Matsuno said. He noted that Japan, the United States and other major Group of Seven economies have agreed that exchange rates should be decided by markets.

Japan’s exports rose 15% in March to 8.46 trillion yen ($65 billion), helped by a recovery in demand as coronavirus outbreaks wane and governments lift pandemic restrictions on goods. trips and other activities. Imports rose 31% to 8.9 trillion yen ($68 billion).

Imports account for less than a fifth of Japan’s economic activity, but nearly all of the oil, gas and coal used to power its economy.

Import costs for fuels such as oil, gas and coal soared just over 80% from a year earlier in March, while food imports jumped 22% and 42% chemicals. Meanwhile, Japan’s vehicle exports fell 1.2% as the number of vehicles shipped overseas fell more than 14%.

Japanese automakers and other manufacturers are grappling with production cuts due to pandemic-related disruptions in the supply of computer chips and other critical components.

Economists predict a strong rebound once these issues are resolved. But data shows new export orders have fallen recently, suggesting export growth remained weak in April, Capital Economics’ Tom Learmouth said in a report.

“And given that there are no immediate signs of the chip shortage easing for automakers, exports are likely to remain weak until later in the year,” he said.

Preliminary data for the fiscal year that ended in March showed exports jumped almost 24%, but were overtaken by imports, which soared 33%. The fiscal year deficit of 5.4 trillion yen (nearly $42 billion) was the highest in seven years.

The Bank of Japan has sought to slow the weakening of the yen and could rely on the country’s huge foreign exchange reserves to sell dollars in order to buy yen. But there are limits to this kind of intervention and it’s unclear how effective it can be, economists say.

That means Japan is paying more for its imports as the war in Ukraine and growing demand from economies recovering from the pandemic push prices for oil and other commodities higher.

Japan’s bill for imports of fuels such as oil, gas and coal jumped 87% in the last fiscal year, the figures show.

Crude oil prices are around 40% higher this year alone, with US benchmark crude trading around $100 a barrel and Brent crude, the international pricing base, slightly higher.

“In a situation like the current situation, with companies still not raising prices and wages enough, a weak yen is not desirable,” Suzuki, the finance minister, told parliament earlier this week. .