Japan Trade Deficit:

 Article Source: https://mainichi.jp/english/articles/20220616/p2g/00m/0bu/023000c

Article:

TOKYO (Kyodo) -- Japan logged its second largest ever monthly goods trade deficit of 2.38 trillion yen ($17.7 billion) in May, remaining in the red for the 10th consecutive month mainly due to high commodity prices, the Finance Ministry said Thursday.

The trade deficit in May widened from 839.2 billion in the previous month and was the second largest after a 2.80 trillion yen deficit recorded in January 2014, according to the ministry.

The value of imports increased 48.9 percent to 9.64 trillion yen, shattering the highest figure on record for the third consecutive month, while exports rose 15.8 percent from a year earlier to 7.25 trillion yen for the 15th straight month of increase, the ministry said in a provisional report.

Ideas:

The trade deficit for some countries is not such a big deal, as trade is not a major factor in economic growth.

But for Japan, a major export trade country the trade deficit might seem important. But we also see 15 straight months of exports increasing so, this situation is maybe not the normal trade scenario that is seen every year.

We might be able to assume that in terms of volume, exports might have been more than imports but because of the weak yen its made the value of imports more than the value of exports.

We also have to remember the weak yen makes Japanese products more expensive in foreign countries such as the US, which could be good and not good, depending on consumer behavior in foreign countries.

And the weak yen then bring more back into the Japanese current account but in this scenario the yen is so weak it causes an inbalance that is not really what the Japanese economy needs at this time.

Article:

Imports were boosted by higher prices of energy resources, such as petroleum from the United Arab Emirates, coal from Australia, and liquefied natural gas from Australia and Malaysia, a ministry official said.

Driven by rising energy prices resulting from Russia's invasion of Ukraine, imports of petroleum rose in value for the 14th consecutive month to 1.07 trillion yen and increased in terms of volume for the seventh straight month to 12.2 million kiloliters.

Sanctions that Japan has imposed against Moscow over its aggression, in line with other Group of Seven nations, dented import volumes of mineral fuels from Russia such as petroleum, coal and LNG. Still, the value was up 65.2 percent from a year earlier at 111.3 billion yen reflecting rising energy prices, according to the ministry.

Ideas:

The prices or value of imports might have gone up but of course that doesn't mean the volume of imports increased. 

Most likely even though the prices have increased importer probably are unable to secure or find alternative resources as they might be locked into lock-term contracts and or as normal all suppliers have simlar price lines for their products which making finding substitutes or alternative sources very difficult.

Just how long can importers, wholesalers, and other compnnies continue to accept the higher prices, meaning is there a break point where they say we can't afford these prices anymore or we find to any alternative is possible.

And then how much of the prices increase can or do they pass on to the next in the supply chain. And those in the supply chain how long can they continue to accept the higher prices as their profit margins most likely continue to decrease over time.

Article:

Exports rose on the back of brisk iron and steel shipping, refined fuel products such as fuel oil to Singapore, and semiconductor components, the official said.

Kazuma Kishikawa, an economist at Daiwa Institute of Research, said the supply chain disruptions caused by measures against the coronavirus pandemic remain in some countries such as China, which implemented a lockdown in Shanghai, keeping exporters from boosting production by capitalizing on a weaker yen.

Manufacturers also failed to keep pace with a rise in input costs, he added.

Ideas:

Most likely supply chain disruptions are going to remain in the global marketplace for as long the pandemic conditions remain. 

Increasing inputs cost are not easy to manage and manufacturers have to plan ahead of time and budget their production schedules sometimes based on the current price scenarios.

So as costs keep increasing they have to keep revising their supply lines, their production situatons and so which makes for a lot of disruptions for manufacturing companies in the short-term and eventually in the long-term.

The China situation is of course a major concern and companies everywhere, not just Japanese companies have to always keep adjusting to the Chinese situation which means they can't adequately prepare and there might be constants stops and starts within the Chinese economic environment.

It has been suggested, for example, that some South Korean companies are considering leaving the Chinse market because of the constant uncertainty.

Article:

Among such sectors, auto exports to China dropped 36.3 percent in the reporting month and those of chip-making devices decreased 9.7 percent from a year earlier, both by value.

"If supply-side constraints ease, the trade deficit (for Japan) will be narrowed," Kishikawa said.

Ideas:

The key of course is when will supply-side contraints ease. For companies just exporting to China it might not a perfect situation as Japanese export companies might be able to see some light at the end of the pandemic tunnel eventually.

But for companies actually in China it might be a different situation as any kind of pandemic panic, might cause serious disruptions in exporting from China not to mention getting the necessary supplies needed.

Yes China is huge geogrpahic area which means not all of China is always in lockdown, but it seems Shnaghai, a major trade area seems to be in that situation recently.

Have a nice day and be safe!