Japan Car and Other Exports

 https://mainichi.jp/english/articles/20211020/p2g/00m/0bu/024000c

Article:

TOKYO (Kyodo) -- Japan's car exports in September fell 40.3 percent from a year earlier, as supply chain disruptions in Southeast Asia due to the coronavirus pandemic and a global semiconductor crunch forced domestic automakers to cut output, government data showed Wednesday.

Auto shipments marked the first year-on-year drop in seven months and the sharpest decrease since a 49.9 percent dive logged in June last year amid the initial shock of the pandemic, according to a preliminary report by the Finance Ministry, in a development that could put a damper on the nation's economic recovery.

The slump in car exports slowed growth in Japan's overall goods exports in the reporting month to a 13.0 percent rise from a year earlier to 6.84 trillion yen ($60 billion), compared with a 26.2 percent gain in August and a 37.0 percent jump in July.

Ideas:

There was a BBC article earlier that had a comment from an German carmaker spokesperson who said the chip shortage might continue into 2022.

Its kind of perplexing that there is even a chip shortage, and yes there have been challenges related to the pandemic and chip manufacturers having labor challenges with some or many getting the virus. 

Most what is interesting is there are many more manufacturing companies and others that haven't had the challenges related to the pandemic. So why is this situation specific to the chip industry and or even effecting the car makers and electronics manufacturers?

So what is unique for example, as to why there might have been or is a shortage in the chip manufacturing industry? For example, yes there might have been or is a large increase in demand for car and electronics. But was the demand that much?

Surely there have been periods of a sudden increases in demand and there were the delays or shortages seen now.

And then there is the idea of stockpiling or making extra as needed just in case of sudden increases in demand.

Perhaps the virus wave that swept through Taiwan and other places has been too much and possibly there was or never was the idea of stockpiling chips for large and sudden increases in demand and or companies have or were operating on the Toyota production model or "just in time" manufacturing meaning they only produce what is needed for now and not later to save cost.

But the chip shortage is definitely going to effect the Japanese economy's recovery and its going to take much longer to get back to the pre-pandemic level.

Article:

Goods exports nevertheless saw a double-digit percentage increase for the seventh straight month, according to the ministry.

Imports expanded 38.6 percent to 7.46 trillion yen, up for the eighth month in a row, mainly pushed up by surging prices for crude oil purchased from producers such as the United Arab Emirates.

As a result, Japan's trade balance registered a deficit of 622.76 billion yen, turning negative from a 667.36 billion yen surplus a year ago to post red ink for the second consecutive month.

Ideas:

So despite challenges with the exports of car globally, merchandises and other products have rebounded which is good for the Japanese economy. 

And imports seem to have rebounded too, but there is question mark related to imports. Perhaps the volume of imports and value of imports should be separated from crude oil imports to get an accurate picture of imports into Japan.

If the increase in prices for crude oil prices is the only thing that is looked at its hard to see just what is the real picture of imports into Japan?

And as expected there is a trade deficit instead of a trade surplus. If perhaps crude oil is not included then maybe there might be a trade surplus or the deficit wouldn't be as significant as it is.

Whenever there is a trade deficit in reduced the current account of the Japanese government. 

Exports increase the current account and imports reduce the current account. But what is the real picture? Take crude oil out of the equation and the picture might look different.

Article:

A ministry official told reporters that Japanese automakers have been cutting production in response to parts shortages caused by factory shutdowns in Southeast Asian nations as coronavirus cases surged there as well as the prolonged worldwide chip crunch.

Earlier this month, Toyota Motor Corp. said it estimates its global output for November will fall by up to 150,000 units from its initial plan to produce about 1 million vehicles, while Honda Motor Co. has said it expects its October domestic production to drop by 30 percent from the previous plan.

Also citing the recent congestion of cargo ships at ports in California and elsewhere as a potential factor, the official said, "The supply side challenges, in a broad sense, might have affected car exports."

Ideas:

The chip shortage is not only effecting the eight Japanese car makers but also any company that is connected to the carmakers as they to might have to reduce or delay what they do in relation to what the carmakers do. 

So it has a domino effect throughout all companies related to the carmakers. As a result this might have a long term effect on the Japanese economy being able to move past the pandemic period. 

The Japanese car industry is big and just how much does it contribute to the overall Japanese economy will be seen in the coming months, or how much of an effect does the decrease in output have on the Japanese economy will be seen in the coming months if not now.

And then there is the cargo ship challenges in California. For example if the Japanese carmakers have recently shipped cars to the US, which goes through LA or Long Beach it could take months to unload.

It has been reported that there area still 100+  container ships sitting off the coast of California and some have been there since August.

So add in the supply shortages shortage and the logistics challenges the Japanese carmakers have some real challenges to overcome now and in the future.

Article:

Takeshi Minami, chief economist at the Norinchukin Research Institute, predicted that Japan's auto exports could remain sluggish "at least until the year's end" with semiconductors in short supply "for the time being."

However, Minami added, "The virus spread in Southeast Asia, driven by the (highly contagious Delta) variant, is calming down, so the auto parts procurement problem is expected to dissolve gradually" except for chips.

By country, exports to China, Japan's largest trading partner, rose 10.3 percent to 1.48 trillion yen for the 15th consecutive month of growth on brisk shipments of semiconductors and plastics. Imports from the neighboring country gained 23.8 percent to 1.77 trillion yen.

Ideas:

Japan's auto exports mostly likely will remain sluggish especially to the US because of the shipping challenges into the LA area.

And if the other supply challenges beside the chip challenges begin to work their way back to some kind of normalcy then perhaps the Japanese automakers can begin to get back to some kind of normalcy or a kind of a new normal despite the chip challenges.

Perhaps another question needs to be asked or considered. For example, if a company or companies such as car makers only rely on the same suppliers and the suppliers begin to have problems or challenges wouldn't it be wise to look for other suppliers in the future?

But in all fairness most likely this was situation that effected every chip maker globally? Or was it. For example are there or were there chips makers in other parts of the world beside Asia? How about the EU for example? Are there chip makers in the EU that might not have been effected? But maybe they because now there is the supplies needed to make the chips and where do the chip supplies come from?

Its good to see that exports to China continue to grow as will most likely continue to improve as both countries move past the pandemic. And is good to see import coming into Japan from China which indicates demand in Japan is continue to improve too.

Article:

In trade with the United States, Japanese exports marked the first decline in seven months, down 3.3 percent to 1.16 trillion yen, while imports grew 36.3 percent to 762.53 billion yen.

Across Asia including China, exports rose 21.3 percent to 4.09 trillion yen. Imports from the region grew 25.7 percent to 3.51 trillion yen.

Shipments to the European Union increased 12.1 percent to 621.26 billion yen, with imports from the bloc expanding 25.0 percent to 839.50 billion yen, led by pharmaceutical products including COVID-19 vaccines.

Ideas:

Perhaps the drop in exports to the US might just be related to the log jam off the coast of California as most likely the product is not really considered an export until it is inspected by US customs officials and cleared into the US.

Or it could just be a lull in demand related US company and consumer demand for the time being as demand will pickup again in the future.

The real picture might be to look at the inventories of companies that export to the US. Are they sitting on a lot of extra inventory waiting to be shipped to the US? And it could be nothing more than the estimates of demand for the future was not as accurate as it should have been and companies over-produced and now have extra good waiting for demand to increase.

And its good to see imports from the US and the EU into Japan increasing as it shows demand from companies and consumers increasing.

Article:

For the first half of fiscal 2021 from April, Japan's goods trade posted a deficit of 389.79 billion yen, the first red ink since the first half of fiscal 2020.

Exports rose 34.2 percent from a year earlier to 41.46 trillion yen, logging the fastest growth since the ministry began compiling data in January 1979, and imports were up 30.3 percent to 41.85 trillion yen. Both of them rose sharply, mainly in reaction to the previous year's 19.2 percent and 17.9 percent falls, respectively.

All figures were compiled on a customs-cleared basis.

Ideas:

The idea of trade deficits and trade surpluses need to be taken with a "grain of salt" meaning they should always be seen as something exactly positive or something exactly negative.

Sometimes the phrase "trade deficit" can be taken as a political statement. For example it gets too much in relation to China and the US.

Of course in the 80's it was the catch phrase related to the US and Japan. 

So in reality exports increased 34.2 percent, which of course is very good and then imports increased too 30.3. So 41.46 vs 41.85 respectively. 

But it must be remembered as has been mentioned and even in this article, the increase in crude oil prices which might have caused imports to increase to 41.85 trillion yen.

So what is the real value for imports if the increase in crude oil prices are not included?

So again the numbers need to be taken with a grain of salt as they might not show the real picture despite the well meaning of those who track and reports the numbers.

Ideas updated on Nov. 8, 2021.

Have a nice day and be safe!