Japan Current Account:

 Article Source: https://mainichi.jp/english/articles/20220608/p2g/00m/0bu/026000c

Article:

TOKYO (Kyodo) -- Japan's current account surplus shrank 55.6 percent in April from a year earlier to 501.1 billion yen ($3.8 billion), government data showed Wednesday, as imports grew to their highest level in more than 20 years on soaring energy costs due to Russia's invasion of Ukraine.

The current account balance, one of the widest gauges of international trade, remained in the black for the third consecutive month, the Finance Ministry said in a preliminary report. But the goods trade balance dipped into the red with a deficit of 688.4 billion yen on the increased imports.

Ideas:

Japan has been a trade surplus for a very long time. So the current period of a few month or even a year of a trade deficit is not going to affect the Japanese economy or the Japanese government bank account, as the currenct account might be called, that much. 

Its important to remember the Japanese economy is still very much an export focused economy meaning exports are still a very important part of the economy which brings a lot money back to Japan.

It must be remembered the difference between trade volume and trade value. In this case the trade value of imports has increased dramatically due to increasing energy costs and incresing raw material costs.

Most likely the volume of imports hasn't increased that much but the value of imports has now overcome the value of exports which of course reduce the Japanese current account.

Article:

The value of imports grew 32.8 percent to 8.7 trillion yen, up for the 15th consecutive month and the highest since comparable data became available in 1996.

Japan's crude oil imports almost doubled in the reporting month. Those of liquefied natural gas and coal increased 2.5 times and 3 times, respectively.

In addition to higher energy costs, the recent sharp fall of the yen against the U.S. dollar also caused import prices to rise.

Ideas:

So there are different variables here which is causing some challenges for the Japanease economy. First is the increase in raw material prices/costs that importers now have to pay and second is the increase in energy costs that not only importers have to pay and then they might pass on their costs to the next in the supply chain.

And then there is the weak yen, which is making the first two variables even more challening for importers and everyone else in the Japan. 

While its not good to compare inflation from country to country as each country is very much different, the inflation in Japan might not be quite as bad or as much as in other countries. 

But for some it might be so good as increases in gasoline prices, increases in supermarket prices, and increases home energy costs might be getting too high now.

So while the Bank of Japan is going to maintain its present strategy of low monetary easing or policy, the Japanese government, and fiscal strategies or policies might be thinking they need to watch this very carefully because while some in society or in business might be OK, there might be some or many that aren't doing so good now.

Article:

Exports expanded 17.2 percent to 8.0 trillion yen, up for the 14th straight month, led by brisk shipments of iron and steel, mineral fuels and automobiles.

The services trade balance, which includes cargo shipping and passenger transportation, registered a 965.3 billion yen deficit, improving by 6.2 billion yen.

The travel balance, which reflects money spent by foreign visitors in Japan on services and goods against the amount Japanese spent abroad, posted a 15.5 billion yen surplus, smaller than the 16.3 billion yen logged a year earlier.

Ideas:

So if we focus on the big picture and not just the idea that the value of imports has increased we still see that exports are still doing fairly good. But the increase in exports of course is overlooked because of the increase in raw materials, the increase in energy costs, and the increase in the weak yen.

But it must also be remembered that weak yen is good for exporters as they can get higher prices for their products they sell overseas.

The services trade balance is always related to energy costs, and as fuel/energy costs continue to increase there is always going to be some kind of deficit unfortunately.

Just look at ANA and JAL and there prices this summer and see is happening to them. While people want to travel after two years of not so much, some might be waiting because of the fuel cost surcharges or other costs travelers now have to pay.

The travel balance and foriegn vistors is a little bit of a mystery as many times its been reported that travel to Japan by foreign visitors is down as much as 95 percent. So what exactly is the 15.5 billion yen surplus all about. 

If they mean there was more spend by Japanese tourists outside of Japan then that is vcry understandable as the weak Japanease yen might have made it seem more.

So maybe the weak yen is part of the situation and or the number of Japanese travelers going to the countries etc.

So again because of the weak yen, the Japanese who go to the EU and or the US now have to pay more because the dollar and or the euro is stornger which makes those who go to Japan and spend look like they are acually spending more when the volume in spending might not be that much different. 

So the main reason for the travel balance situation.

Article:

Japan has been relaxing its border controls in phases since March by accepting businesspeople, technical interns and students amid an improving situation regarding COVID-19.

Primary income, which reflects returns on overseas investments, posted a surplus of 2.4 trillion yen, up 18.2 percent.

Ideas:

So yes, as more and more business people come to Japan and they spend time in Japan, that can't be all of the 15.5 yen surplus. There has got be something else to it not being reported here.

It this was related regular international tourists then it would be very understandable, but Japan, for most of the last two years, seems to have been shudown, for many expect a few in terms of whomever entering Japan.

The primary income, of course is very much related to the weak yen, as money, the yen, is brought back to Japan the value increases because of the weak yen, for example against the US dollar or the EU euro.

The primary income situation is a good example of what exporters might also be experiencing because of the weaker yen than usual. They might be getting larger than usual higher prices for their products.

Have a nice day and be safe!