Japan’s imports surged to a record high in June as a weak yen and elevated oil prices sharply increased the country’s import bill, revealing the difficult balancing act facing the Bank of Japan (BOJ) as it seeks to contain inflation without derailing a fragile economic recovery.

Government data released on Wednesday, which was first published by Reuters, showed imports climbed 25.4% from a year earlier to an all-time high of 11.3 trillion yen ($69.25 billion), exceeding economists’ forecast of a 21% increase and marking the fastest pace of growth since November 2022. The surge was driven largely by crude oil, with the depreciation of the yen magnifying the cost of energy imports for the world’s fourth-largest economy.

The figures amplify a growing concern for Japanese policymakers that the country’s currency weakness is becoming a major source of imported inflation. Unlike demand-driven inflation, which reflects stronger consumer spending and wage growth, imported inflation raises living costs by increasing the price of essential goods such as fuel, electricity and food, reducing households’ purchasing power.

That dynamic presents a challenge for the BOJ ahead of its policy meeting next week. The central bank is widely expected to keep its benchmark interest rate unchanged, but economists expect policymakers to maintain a hawkish bias, signaling they remain prepared to tighten policy further if inflation proves more persistent.

For years, Japan battled deflation and weak price growth, prompting the BOJ to maintain ultra-loose monetary policy while other major central banks aggressively raised interest rates. The resulting interest rate gap has weighed heavily on the yen, making imports significantly more expensive while boosting the overseas earnings of Japanese exporters.

The latest trade figures illustrate that imbalance.

Although crude oil import volumes fell 13.7% from a year earlier, the value of those imports jumped 59.3%, with the yen-denominated unit cost climbing to a record high. The sharp increase highlights that higher prices, rather than greater demand, are driving Japan’s swelling import bill.

“Japan’s diversification of oil procurement sources is progressing, with purchases from the United States and Russia surging, while declines in imports from the Middle East have moderated,” said Koki Akimoto, an economist at Daiwa Institute of Research.

The shift comes amid Japan’s broader effort to reduce its dependence on Middle Eastern oil as recurring geopolitical tensions threaten global energy supplies. However, the country remains heavily reliant on imported fossil fuels following the reduction of its nuclear power capacity after the 2011 Fukushima disaster, leaving it vulnerable to swings in global commodity prices and exchange rates.

Geopolitical developments continued to influence trade during the reporting period. Although high-level U.S.-Iran peace talks began in late June and crude prices subsequently eased, uncertainty surrounding the conflict disrupted shipping routes and energy markets for much of the month. Renewed hostilities between Iran and the United States in recent weeks have once again raised concerns about potential supply disruptions and higher energy costs.

“While hopes had been rising among major economies for easing inflation and a recovery in growth, prolonged instability could weigh on global economic activity and increase the risk of a broader slowdown,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

The BOJ has already acknowledged the inflationary implications of the conflict. Earlier this month, the central bank warned that higher energy prices resulting from the Iran war could encourage more companies to raise prices later this year, increasing the likelihood that inflation remains above its 2% target and strengthening the case for additional interest rate hikes.

However, policymakers also see important sources of resilience within Japan’s economy, particularly the global boom in artificial intelligence investment.

That optimism was reflected in June’s export performance.

Exports rose 19.3% from a year earlier, beating economists’ expectations for an 18.6% increase and accelerating from May’s 16.8% growth. The increase was supported by the weaker yen, which enhanced the price competitiveness of Japanese goods abroad, and by robust demand for AI-related infrastructure, including semiconductors, electronic components, chipmaking equipment and data center hardware.

Japan’s technology and industrial sectors are increasingly benefiting from the multiyear AI investment cycle led by major U.S. technology companies, which continue to spend heavily on advanced chips, servers and cloud infrastructure. The sustained expansion of AI-related capital expenditure has become a significant driver of Japanese exports, helping offset weakness in other parts of the global economy.

Exports to the United States rose 13% in June, led by strong automobile shipments. Persistently high gasoline prices encouraged American consumers to purchase more fuel-efficient hybrid vehicles, benefiting Japanese automakers that dominate the hybrid market. The weak yen also improved the international competitiveness of Japanese vehicle exports, supporting manufacturers’ overseas earnings.

Still, the strength in exports was insufficient to offset soaring import costs.

Japan recorded a trade deficit of 406.9 billion yen ($2.49 billion) in June, far wider than the market expectation of a 120 billion yen deficit. The larger-than-expected shortfall illustrates how rapidly rising energy costs continue to outweigh gains from exports, limiting the positive impact of stronger overseas demand.

The widening deficit also highlights a broader structural issue for Japan. While a weaker yen generally boosts exporters by increasing the value of overseas revenues when converted into domestic currency, it simultaneously raises production costs for companies that rely on imported energy and raw materials. Smaller businesses, which have less pricing power than large manufacturers, often struggle to absorb those higher costs, while households face rising prices for electricity, transportation and food.

According to Daiwa’s Akimoto, exchange rate dynamics remain the dominant factor influencing Japan’s trade outlook.

“The yen’s weakness is primarily being driven by Japan’s low interest rates relative to other major central banks and concerns about fiscal policy, rather than the current account balance,” he said.

That suggests the yen may remain under pressure unless the BOJ narrows the interest rate gap with the U.S. Federal Reserve and other major central banks or global investors become more confident about Japan’s fiscal outlook.

Looking ahead, economists expect markets to closely scrutinize next week’s BOJ policy statement for any changes in language regarding inflation risks, wage growth and the pace of future rate increases. While policymakers are unlikely to tighten policy immediately, persistently high import costs, elevated energy prices and continued yen weakness could strengthen the case for further normalization later this year if inflation remains broad-based.

Samsung Electronics is in talks to invest as much as €1 billion (about $1.14 billion) in French artificial intelligence startup Mistral AI, joining a new funding round that could value the company at around €20 billion ($22.8 billion), according to a report by the Financial Times.

Citing people familiar with the matter, the newspaper said the South Korean technology giant is considering an investment worth roughly €1 billion, while Swedish private equity firm EQT, through its Scaleup Europe Fund, is also in discussions to participate in the fundraising.

If completed, the deal would rank among Samsung’s largest investments in artificial intelligence and reinforce the company’s ambitions to deepen its presence across the rapidly expanding AI ecosystem, extending beyond semiconductors into foundation models, enterprise AI software and cloud infrastructure.

Neither Samsung nor Mistral immediately confirmed the report.

The reported investment comes as Samsung accelerates efforts to strengthen its AI portfolio amid intensifying competition from rivals including Nvidia, Microsoft, Alphabet, Amazon and Meta.

Earlier this year, Samsung said it would pursue investments and acquisitions where necessary to accelerate commercialization in emerging technologies, particularly robotics and artificial intelligence, while also expanding partnerships with technology companies. An investment in Mistral would complement Samsung’s broader AI plan, which spans memory chips, AI-enabled smartphones, consumer electronics, cloud infrastructure and next-generation computing platforms.

The move could also create opportunities for Samsung to integrate Mistral’s large language models into future Galaxy smartphones, AI-powered home appliances and enterprise solutions, while potentially strengthening demand for the company’s advanced memory chips that power AI systems.

The fundraising discussions come just days after Microsoft announced a multibillion-dollar agreement with Mistral to expand the startup’s AI computing infrastructure across Europe. The partnership will provide Mistral with significantly greater computing capacity while making its models more widely available through Microsoft’s cloud ecosystem, enabling enterprises and developers to deploy the French company’s AI technology more easily.

The twin developments show that Mistral is emerging as Europe’s leading AI startup and one of the few companies viewed as capable of challenging the dominance of American AI developers.

Founded in 2023 by former researchers from Google DeepMind and Meta, Mistral has rapidly become the flagship of Europe’s efforts to develop homegrown frontier AI models. The company has positioned itself as a European alternative to OpenAI, Anthropic and Google, emphasizing open-weight models, greater transparency and technological independence.

Its technology is already used by the French military and government agencies, reflecting Europe’s growing emphasis on strategic digital autonomy.

The reported Samsung investment supports broader efforts by Europe to stand alone in AI development. European policymakers have increasingly sought to reduce dependence on U.S.-based AI providers amid concerns over data sovereignty, national security and long-term control of critical digital infrastructure.

Those concerns intensified after the United States last month suspended foreign access to two advanced AI models developed by Anthropic, highlighting the risks associated with relying on overseas AI platforms for critical government and commercial applications.

The decision bolstered calls across Europe to build independent AI capabilities that are less vulnerable to export restrictions or shifts in U.S. policy.

Although Mistral remains significantly smaller than leading American AI companies, its rapid rise has attracted substantial investor interest. But its projected €20 billion valuation remains well below the valuations of major U.S. AI firms such as Anthropic, OpenAI and xAI, which have attracted funding at valuations running into hundreds of billions of dollars. Nevertheless, the fundraising would further cement Mistral’s position as Europe’s most valuable AI startup and one of the continent’s most strategically important technology companies.

For Samsung, backing Mistral would also strengthen relationships with one of Europe’s fastest-growing AI developers at a time when demand for AI infrastructure continues to surge. As one of the world’s largest producers of high-bandwidth memory (HBM), DRAM and advanced semiconductor components, Samsung stands to benefit from the rapid expansion of AI data centers and model training, regardless of whether demand comes from U.S. or European AI developers.