Japan Trade Deficit:

 Article Source: https://mainichi.jp/english/articles/20220915/p2g/00m/0bu/024000c

Article:

TOKYO (Kyodo) -- Japan posted a record 2.82 trillion yen ($19.7 billion) trade deficit in August after higher energy prices and a sharp drop in the yen pushed the value of imports to their highest-ever level, the Finance Ministry said Thursday.

The country's trade deficit has been widening recently and August marked the 13th straight month of red ink, underscoring the impact resource scarcity and heavy dependence on imports have on Japan.

The deficit was larger than the previous record of 2.80 trillion yen seen in January 2014.

Ideas:

While the value of imports might have increased there still might have been a large volume of exports but of course the weak yen inflated the value of imports to the point that the volume of exports look not so good.

But then again the weak yen increased the value of exports in for example the US but because the weak yen is at record levels the value of imports are at an all time high too.

There is probably nothing that Japan can do about the resource-poor situation, meaning it can't just produce or create the resources needed in Japan.

One of the challenges might be that many companies even in Japan trade in US dollars and that might be a problem too.

Most likely many Japanese companies have bought dollars or exchanged the yen on the futures market as a way to protect themselves from the yen weakening but the yen keep weakening which makes a future exchange for even a month from now a major challenge if the yen continues to weaken.

Article:

Imports surged 49.9 percent to 10.88 trillion yen, the largest increase by value since comparable data became available in 1979, lifted by higher prices for energy sources such as crude oil, coal and liquefied natural gas.

Exports, meanwhile, jumped 22.1 percent to 8.06 trillion yen after shipments of cars and chip-related equipment increased.

"The weaker yen is boosting (the cost of) imports at a time of surging energy prices. Energy and grain prices have shown signs of stabilizing recently, but the impact of the sharp drop in the yen will continue for a while with a lag," said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co.

Ideas:

In normal times a 22.1 increase in exports would look very good but of course the weak yen had something to do with it.

As there are always positives and negatives to a weak currency in this situation the weak currency has moved too far and has been more of a negative than a positive for the Japanese economy.

Energy and grain prices, and maybe other raw materials prices might have shown signs of stabilizing but that doesn't mean they are beginning to decrease.

The might have just reached a plateau and will remain at their present level for a while. And as the yen continues to weaken prices might continue to increase even though the energy and grain markets have stabilized for slowed down.

Article:

Russia's war on Ukraine has sent crude oil and other raw material costs surging. The yen's rapid weakening against the U.S. dollar has added to the woes of Japan as it inflates import costs.

The price of imported crude oil roughly doubled from a year earlier to 95,608 yen per kiloliter.

The yen has fallen sharply in recent months. It was down 22.9 percent from a year earlier at 135.08 versus the U.S. dollar in August, according to the ministry data.

Ideas:

The Ukraine situation didn't begin the increase in imports prices in Japan but it did seem to make it more worse. Inflation had been increasing slowly since the pandemic began but the war accelerated inflation globally.

The Bank of Japan still thinks inflation is going to be only a short-term temporary situation. But to be fair to the BOJ just what is short-term and what is temporary when there are households and companies suffering because of the weak yen or the surge in import prices.

The Bank of Japan might have some very good reasons for not interfering in the Japanese economy and or trying to manage inflation like the US and the EU is doing as there are some definite side-effects to increasing the key rate.

Just how much must the Japanese yen fall before the Bank of Japan does something to keep it from falling further.

But maybe the Bank of Japan sees or understands once it does start to increase the key rate, even slowly, there are going to be a wave of side-effects moving all through the Japanese economy and the BOJ and this time doesn't want to deal with the side-effects once they begin.

Article:

It traded in the 143 range on Thursday near a 24-year low, a day after caution grew about direct intervention by the government to prevent a further drop.

"The worry is that China's economy is slowing and the United States is also hit by the double whammy of inflation and rate hikes. This will slow Japanese exports to the major trading partners and the economy, too," Kodama added.

Economists expect the Japanese economy to continue growing in the July-September quarter as the impact of the COVID-19 pandemic wanes, but its pace will likely slow as domestic demand remains weak and accelerating inflation hits households.

Ideas:

Just what is direct intervention and how is the Japanese government or even the Bank of Japan going to do it exactly.

The Chinese economy is going to continue to slow as the covid policy will  continue to keep the economy in check and then the slow down in the global economy will have an effect too.

The US now is seeing the negative side-effect of the rate increases. The US Federal Reserve has admitted the US economy is going to have to slow down to see a decrease in inflation which means Japanese exports to the US might see a period of decline.

The Japanese economy will probably continue to increase but not at the the rate because of inflation and the weak yen which will slow consumer  consumer spending which will be the major factor that crowds out any real economic growth in the Japanese economy.

Households or consumer spending will continue to see a decline in their disposable income as home energy prices increase as supermarket prices increase along with many other items in the Japanese economy.

Article:

Strong external demand has boded well for Japan, boosting exports of cars, auto parts and other equipment. Helped by such items, Japan had a trade surplus of 471.5 billion yen with the United States.

Still, the pace of year-on-year growth was faster for imports than for exports with the United States, 40.5 percent to 1.07 trillion yen and 33.8 percent to 1.54 trillion yen, respectively.

However, with another major trading partner, China, Japan reported a trade deficit of 576.9 billion yen. Imports grew 34.2 percent to 2.19 trillion yen, helped by those of clothes, smartphones and televisions, outpacing a 13.5 percent gain in exports to 1.61 trillion yen, led by hybrid cars, audio equipment and others.

Ideas:

Strong exports to the US is very good but what is it going to look like in 2023 if there is a real recession in the US and consumer demand in the US weakens considerably.

If inflation and the weak yen continue in Japan it is not going to look so good for Japanese exports vs imports.

However, there are always positives and negatives to global trade, as with one country there might be a trade surplus and with another country there might be a trade deficit.

The trick of course is to be able to manage both a trade deficit and a trade surplus at the same time knowing that because of currency exchange rate differences not all is going to be equal all of the time.

Major export countries like Japan can't expect to have a trade surplus every month or even every year and there are always going to be external and internal challenges to importing and exporting, and as such companies and economies have to learn to adjust their strategies to best manage the challenges.

Article:

A trade deficit of 130.8 billion yen was reported with the European Union, lifted by cars and lumber.

Imports from the region fell 1.2 percent from a year earlier to 852.6 billion yen, compared with exports that grew 16.7 percent to 721.8 billion yen.

Ideas:

Just what does lifted by cars mean exactly. Does it mean the trade deficit could have been worse except for the the exporting of cars to the EU or does it mean there were a lot of cars imported to Japan from the EU.

Again exports and imports are not always linear meaning they can easily go up and down over time.

For example for the US Japan might see continued export growth, while for China a decrease in exports and for the EU some export growth. 

Most likely the Ukraine war might have had some effect on the decrease in imports from the region.

Have a nice day and be safe!