Japan Current Account:

 Article Source:  https://mainichi.jp/english/articles/20220808/p2g/00m/0bu/016000c

Article:

TOKYO (Kyodo) -- Japan's current account surplus shrank 63.1 percent in the first half of 2022 from a year earlier to 3.51 trillion yen ($25.9 billion), the lowest in eight years due to a major goods trade deficit stemming largely from a higher oil price and the weak yen, the Finance Ministry said Monday.

The surplus in the current account balance, one of the widest gauges of international trade, fell to the lowest level since it sank into the red in the first half of 2014, according to the ministry's preliminary report.

The fall was also the second steepest for a half-year period following the second half of 2008, when a global financial crisis was sparked by the collapse of U.S. securities firm Lehman Brothers Holdings Inc., data showed.

Ideas:

Japan's currenct account it probably going to continue to decrease for a while with surging energy prices, raw material prices and the weak yen are going to drain the current account.

Despite the weak yen supposedly a postive for exporters it seems the weak yen it too weak for the Japanease economy and how it migh help exports replinish the current account.

Japan has always been a major international trade country and the current account has always been an positive indicator for Japan, but these days the opposite might be true.

But fortunately, because Japan has always had a rather large export emphasis, the trade balance as alawys been a postive for the Japanease economy.

Article:

Among key components, the resource-poor country had a goods trade deficit of 5.67 trillion yen and a service trade deficit that expanded to 2.49 trillion yen from 2.09 trillion yen in the first half of 2021, according to the ministry.

The expansion of the deficit in service trade, including travel and transport, resulted from an increase in payments for research and development overseas, including in the pharmaceutical and manufacturing sectors, a ministry official told reporters.

The travel balance, which reflects money spent by foreign visitors in Japan on services and goods against the amount Japanese spent abroad, posted an 82.8 billion yen surplus, smaller than the 106.2 billion yen logged a year earlier.

Ideas:

It must be remembered that the trade deficit situation is not really related to volume but value and the weak yen pushes up the price of imports.

So the actual volume of exports out of Japan probably hasn't changed that much over the past year, its just the value of imports has increased dramatically over the same time period.

As Japan begins to eventually open up more and more travelers will come Japan and will spend even more as the weak yen will be an incentive for international travelers in Japan.

When there were almost 32 million foreign travelers in Japan in 2019 that is a lot of revenue for the current account balance. Hopefully Japan will be able to see those numbers again soon. 

Article:

Meanwhile, primary income, which reflects returns on overseas investments, rose 22.4 percent from a year earlier to a surplus of 12.87 trillion yen, the largest in a half-year period, the data showed.

In June alone, the country logged a current account deficit of 132.4 billion yen, dipping into the red for the first time in five months, largely due to the goods trade balance going into the red, the ministry said.

The value of imports rose 49.2 percent from a year earlier to 9.70 trillion yen in the reporting month, up for the 17th consecutive month, while exports climbed 20.4 percent in value to 8.58 trillion yen for the 16th straight month of increase.

Ideas:

The value of imports, it must be remembered is very much because of the weakening of the Japanese yen, which pushes up the prices of imports. 

Its not like there were more imports coming into Japan than exports leaving Japan, which of course is very possible because Japan is a resource-poor economy, but Japan has always have a strong export thriving sector but the weak yen has overshadowed what is going on with exports now.

If the Japanese yen was somewhat in congruence with other major currencies there probably wouldn't be such a huge trade imbalance as we see now.

But for the time being the value of imports are going to overshadow the value of exports which is going to cause a continued trade deficit.

Article:

By item, imports of crude oil, coal, and liquefied natural gas significantly increased in June. By region, imports from Asia and the Middle East notably rose, according to the data.

Exports of refined fuel, iron and steel, as well as electronic components including semiconductors notably grew.

By region, exports to Asia and North America significantly rose in the reporting month, according to the ministry.

Primary income expanded in June to 1.22 trillion yen, up 697.5 billion yen from a year earlier.

Ideas:

As it seems trade among countries seems to be fairly robust as there doesn't seem to be a slow down in trade despite the global inflation situation.

Trade is an essential economic for any country to survive and especially Japan as a resource-poor country. So even if there is a so-called recession in 2023 there will always be the need for a robust trade sector among economies.

And if China ever gets back to some kind of normal among it cities and regions and there is no continued lockdowns there could be even more trade among countries in future. not to mention is China begins to allow it citizens to travel again that could be a big boost to Japan as most of the 32 million international travelers in Japan in 2019 were Chinese.

Have a nice day and be safe!