Japan Trade Deficit:

 Article Source: https://mainichi.jp/english/articles/20220217/p2g/00m/0bu/026000c 

Article:

TOKYO (Kyodo) -- Japan posted its largest goods trade deficit in eight years in January, as imports continued to swell on the back of higher energy costs and a weaker yen, government data showed Thursday.

The country had a deficit of 2.19 trillion yen ($19 billion), the sixth straight month of red ink and the biggest since January 2014 when a 2.80 trillion yen deficit was marked, according to a preliminary report by the Finance Ministry.

The value of overall imports rose 39.6 percent from a year earlier to 8.52 trillion yen, up for the 12th consecutive month and hitting a record high for the third month in a row since comparable data became available in January 1979.

Ideas:

While its important to see the trade deficit in terms of value, it might be good to see the trade deficit or surplus in terms of the volume of exports and imports.

Of course the weak yen has a huge effect on the value of imports, which inflates the actual amount that came into Japan.

The weak yen is going to cause all kinds of challenges for all kinds of companies in Japan, as the yen doesn't seem to be getting any stronger, which means importers are going to have to find ways to overcome the increased costs due to the weak yen.

Many companies maybe now are going to have no choice but to pass on their increased costs to the next in the supply chain.

Article:

Surging crude oil, coal and liquefied natural gas prices as well as the yen's depreciation against the U.S. dollar amid prospects of monetary tightening by the U.S. Federal Reserve have all contributed to pushing up Japan's value of imports.

The expansion of imports outpaced a 9.6 percent increase in exports to 6.33 trillion yen, an 11th straight monthly rise based on increased unit prices of exported items such as steel and diesel oil.

Auto exports declined 1.0 percent from a year earlier, compared with 17.6 percent growth in December, reflecting the impact of a cutback in output due to the pandemic.

Ideas:

So now there is a triple challenge of not only the weakening yen, but the continued increase in energy prices globally. And then add in the possiblity of the Federal Reserve increasing the key interest rate is going to make it even more challenging for Japanese companies.

Exports continue to show steady growth, which is a good sign the Japanese products are still in demand globally, whether chip producing equipment to the steady demand for Japanese cars.

The steady growth in exports means the the Japanese current account is not going to be depleted as exports bring money into the Japanese economy and the Japanese current account while imports remove money from the Japanese economy and the current account.

Japan is still an export powerhouse so even a 1.0 percent drop from a year earlier is not going to make a serious dent in the overall import/export structure of the Japanese economy.

Yes Japan also relies heavily on imports being an resource deficient country, but exports, until recently, have been strong enough to overcome the resource deficiency.

Article:

Kazuma Kishikawa, an economist at the Daiwa Institute of Research, cited a resurgence of coronavirus infections in Japan in the reporting month, fueled by the highly contagious Omicron variant, as a reason for the sluggish auto shipments.

"At domestic car parts factories, more workers considered to have been in close contact with infected people were suspended, which forced some major automakers to cut production," Kishikawa said.

By country, exports to China fell 5.4 percent to 1.17 trillion yen, down for the first time in 19 months, mainly due to a drop in plastic and vehicle engine shipments. Imports from Japan's largest trading partner jumped 23.7 percent to a record 2.13 trillion yen.

Ideas:

Exports or specific types of exports can always be in a cyclical or seasonal situation meaning they don't always run exactly in a linear fashion, meaning there might not be positive growth each month or each quarter.

And then add in the continued pandemic situation which means even more reasons for the lack of an increase in exports from year to year, quarter to quarter, month to month and so on.

Besides the pandemic situation there are a many reasons why some shipments on some products change from month to month. It could be such as a surplus of products at the company that uses the Japanese products, it could be some temporary shutdowns in production, it could be a delay in shipping and so on.

And as the yen continues to weaken import prices continue to increase which places even more stress on Japanease importers.

Article:

With the United States, Japan's exports climbed 11.5 percent to 1.12 trillion yen, pushed up by brisk shipments of chip-making equipment. Imports soared 33.4 percent to 781.89 billion yen, underpinned by a rise in medical and petroleum products.

As for the European Union, Japanese exports increased 16.1 percent to 618.04 billion yen, with imports growing 26.2 percent to 870.69 billion yen. Exports to Asia including China totaled 3.58 trillion yen, up 6.3 percent, while imports amounted 4.18 trillion yen, up 29.1 percent.

Looking forward, energy prices could continue to rise amid mounting fears of a possible Russian invasion of Ukraine. But Kishikawa said the impact on Japan's imports could be moderate.

Ideas:

Global trade, at the time of this article looks to be on a continued solid growth pattern despite the weak yen and the increase in energy prices.

And then add in the possible Russia and Ukraine situation it might begin to have some impact on global trade such as with grain exports from the two countries and the energy exports from Russia than many countries now depend on.

Japan seemed to have taken advantage of the idea that chip making equipment is now a major export product as chips are now the major component in most electronic products these days.

So the future for chips producers looks very good it they can continue to produce and not have any situations such as in the summer when the chips plants were temporary shutdown causing delays in many different chip producing areas.

Article:

"Japan buys crude oil mainly from Arab producers, and the price of Dubai crude oil is less susceptible to the Ukraine situation than those of Brent and West Texas Intermediate," said Kishikawa.

He added that an increase in Japan's purchase of COVID-19 vaccines will continue to raise the costs of imports until around April, and the trade deficit will gradually shrink thereafter.

All figures were compiled on a customs-cleared basis.

Ideas:

Its good for any country to not rely too much on only one resource producing country and try to have as many resources as possible to avoid either delays in shipments, delays in production, or even changes in currency strengths or weaknesses.

The easiest way to minimize a trade deficit is to increase exports compared to imports. But as Japan is resource deficient economy, its not easy to always to maintain a trade surplus when the yen is weak and continues to weaken and there is always periods of less or more exports depending on global demand, the pandemic, logistical challenges and so on.

METI and other parts of the Japanease government and so have always recognized that Japan is a resource deficient economy, and most likely always will be and as such, has promoted exporting of Japanease products as a main priority to overcome the cash flow out of the country due the constant need to imports many products for the economy.

Have a nice day and be safe!