Article:
TOKYO (Kyodo) -- Japan's current account surplus shrank 31.4 percent in the first half of 2020 from a year earlier to 7.31 trillion yen ($69 billion), marking the lowest level in over five years as exports and spending by visitors from overseas were hit hard by the coronavirus pandemic, government data showed Tuesday.
In June alone, the current account surplus, one of the widest gauges of international trade, tumbled 86.6 percent to 167.5 billion yen, the Finance Ministry said in a preliminary report.
Ideas:
Japan, despite having a rather large domestic economy, and still the 3rd largest economy in the world, depends heavily on exports, and even more recently tourists from overseas, especially the growing Chinese tourists flocking to Japan.
Both exports and tourists bring money into Japan and or back to Japan, in the case of exports.
The spring of 2020 was not so good for exports or global exports, and global demand decreased a lot along with supply challenges and global logistics challenges during the spring and early summer.
As a result no doubt Japan's current account surplus, like a government's bank account shrank considerably.
Article:
The six-month figure was the lowest since a 3.54 trillion yen surplus in the second half of 2014 when the trade deficit swelled due mainly to a surge in gas imports and a fall in the yen, the ministry said.
The 31.4 percent contraction was the biggest since Japan posted an 89.7 percent fall in the current account surplus in the first half of 2014, it said.
Among key components, the goods trade balance posted a 1.10 trillion yen deficit, turning negative for the first time in three half-year periods, with exports of cars and auto parts sharply down as the pandemic weighed heavily on overseas demand for such items.
Ideas:
The swell in gas imports, and at the same time most likely a increase in oil prices, means that less money is coming into Japan than going out to pay for the higher prices or oil or anything else.
If the currency exchange rate between Japan and any other country is not in Japan' s favor related to imports than Japan is actually losing money.
And for example, with exports, exporters prefer a currency exchange rate that is weak so that they can get more for their products they sell overseas like in the US or China.
And importers prefer a currency exchange rate that is a little strong, as they actually have pay for imports from wherever.
Article:
Exports fell 15.6 percent to 32.01 trillion yen, and imports were down 12.3 percent to 33.10 trillion yen.
Services trade, which includes cargo shipping and passenger transportation, was 1.17 trillion yen in the red for the six-month period, marking the largest deficit since the latter half of 2014 due to tighter international travel restrictions to curb the spread of the virus.
A smaller surplus of the travel balance -- which reflects the amount of money foreign visitors use in the country versus how much Japanese spend abroad -- sent the service trade balance to the negative column from a 172.6 billion yen surplus a year earlier, a ministry official said.
Ideas:
Global trade was down in the spring and early summer of 2020. At the same time, due to global logistics challenges and or a decrease in demand for imported products during the same period might have caused a decrease in imports.
And the biggest challenges were with the services sector, especially the travel bans placed on most global travel.
Japan has become very dependent, whether positive or negative on the huge increase in international travelers to Japan in recent years.
The increase in international tourists to Japan was part of the former prime minister's strategy to boost the Japanese economy.
Article:
The travel surplus plunged to 421.3 billion yen from 1.41 trillion yen as the number of foreign visitors was down 76.3 percent in the first half of this year to an estimated 3.95 million, according to the Japan National Tourism Organization.
Primary income, which reflects returns on overseas investments, posted a surplus of 10.43 trillion yen, down 4.0 percent.
In June, the country had a goods trade deficit of 77.3 billion yen and a services trade deficit of 157.7 billion yen, both in the red for the third straight month.
Primary income logged a surplus of 426.4 billion yen, down 5.8 percent.
Ideas:
Most of those foreign visitors most likely went to Japan before the travel ban was put into place in the first week of March 2020.
For example, I had planned to travel to Japan the first weekend of March, and could have gotten in before on Sunday before the travel ban was put into effect on a Monday, the first full week in March 2020.
Most of those tourists were probably coming from China, which itself, imposed a travel ban on its own citizens during the same time period.
Again, whether good or bad, many Japanese businesses had become highly dependent on international tourists, especially those from China.
The same can be said for South Korea during the same time period of explosive growth in the Chinese tourists traveling to both South Korea and Japan.
Unfortunately both countries tourism and services industries have suffered huge losses.
Have a nice day and be safe!
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