Japan Trade Deficit:

 Article Source: https://mainichi.jp/english/articles/20221020/p2g/00m/0bu/017000c

Article:

TOKYO (Kyodo) -- Japan posted a record 11.01 trillion yen ($73 billion) trade deficit in the first half of fiscal 2022 as imports surged on higher energy and raw material prices, magnified by the yen's decline against the U.S. dollar to its lowest level in decades, Finance Ministry data showed Thursday.

The red ink showed the vulnerability of the resource-scarce nation that relies heavily on imports. The weaker yen, once welcomed as a boon to exporters, a major driver of economic growth, has eroded national wealth.

The deficit was the biggest for any fiscal half-year period. Japan logged its previous record trade deficit of 8.76 trillion yen in the October-March period of fiscal 2013. Comparable data became available in 1979.

Ideas:

The weak yen will probably be around for a while which companies companies and consumers both need to figure out how to navigate through the weak yen situation.

Already consumers are beginning to but back and companies at the same time are passing on their costs to the next in the supply chain either other companies and or the final consumer.

The trade deficit might be decreasing the county's wealth but at the same time Japan probably still have enough in reserve to make it through many more months of deficits.

Exports are still a major driver in Japan and will continue to be for a long time. But even though the yen is weak and it does help exporters the idea that is also hurts most of the domestic economy can't be overlooked.

Article:

In the six months to September, imports jumped 44.5 percent to 60.58 trillion yen, outpacing exports that grew 19.6 percent to 49.58 trillion yen, both record totals, the preliminary ministry data showed.

Major Japanese exports included cars and semiconductors, while imports of crude oil, liquefied natural gas and coal saw marked growth.

"The effect of higher energy prices and the weaker yen was big," said Yuichi Kodama, chief economist at the Meiji Yasuda Research Institute.

Ideas:

So while exports grew 49.58 trillion yen, imports also grew 60.58 yen, which of course is related to the imbalance of the yen and the US dollar. 

If you asked the major exports companies which do the prefer, a weak yen that also affects the domestic economy or a less weaker yen that doesn't have a much effect on the Japanese economy, most would probably prefer as yen that is not as weak as even major exporters have to incur higher import costs related to materials and energy.

Most likely car and specifically semiconductors sales are not at the pre-pandemic level yet because of the global chip shortage.

What's needed to be looked at is the actual volume of exports vs imports and not just the value of the both.

Article:

"Exports have been benefiting from the yen's depreciation of late, which should boost gross domestic product. That said, national wealth has been shrinking, in a blow to the prime minister's push for redistribution," he added.

Japan has been running a trade deficit for the past 14 months, with Russia's war against Ukraine sending crude oil and other energy prices sharply higher.

In September alone, the deficit stood at 2.09 trillion yen, following a record 2.82 trillion yen in red ink a month earlier.

Ideas:

No disrespect but the Prime Minister's redistribution plan is still somewhat vague as to how it's going to work.

Yes, the idea of wage increases are a very good idea but getting Japanese companies to increase wages to the point that workers/consumers feel good about their incomes and actually begin to spend more in the economy does seem to be happening just yet.

Until Japanese consumers begin to see and feel an increase in wages and a high enough wage increase to begin to spend freely in the economy, the redistribution plan is not going to happen just yet. 

There are too many variables that need to be fixed before the Japanese economy really begins to get back to the pre-pandemic level.

Article:

The yen's weakness, a byproduct of the Bank of Japan's monetary easing, has added to the country's woes by inflating import prices. For exporters, however, it means higher profits earned overseas in yen terms. The dollar has gained over 30 yen this year.

Prime Minister Fumio Kishida, who has called for a new version of capitalism with a focus on redistribution, has stressed the need to curb income outflows amid the weaker yen.

Kishida is counting on a recovery of inbound tourism that will make the benefits, rather than the demerits, of the weaker yen felt in Japan.

Ideas:

The weak yen is definitely a boom for exporters but a real stress for the Japanese domestic economy.

Again no disrespect but just what is a new version of capitalism that isn't already out there. 

If the Prime Minister wants to curb the outflow of income then the Prime Minister and the BOJ need to get together have find a way to strengthen the weak yen.

And regarding inbound tourism, tourism is returning to Japan but Japan is not going to see the 32 million tourists like in 2019 until the Chinese situation is resolved as a large number of the 32 million tourists to Japan in 2019 were Chinese tourists.

Tourism of course will help related to the weak yen as tourists can spend more in Japan related to their country's currency.

Article: 

Japan in August saw its lowest surplus in the current account, which includes the balance of trade, with attention on whether the balance would swing to a deficit on a half-year basis.

In the April-September period, Japan had a trade surplus of 3.16 trillion yen with the United States, one of its major trading partners, helped by U.S.-bound shipments of cars and machinery. Exports grew 22.8 percent to a record 9.11 trillion yen and imports rose 32.1 percent to 5.95 trillion yen.

Japan's trade deficit with China widened to 2.84 trillion yen, roughly triple the figure a year earlier of 981.49 billion yen.

Ideas:

The US situation seems to be a little better than the Chinese situation, even though inflation is at an all time high in the US.

That fact that exports grew 22.8 percent to the US could be a good indication that maybe consumer spending of cars is still good. 

China might be not so good as they are still using the covid policy which might be slowing down the Chinese economy.

It used to be said how the US economy goes is how the global goes, and that is still a good measure but maybe even more how the Chinese economy is how the global economy goes too is a good measure due to the fact that so much is produced and exported from China to the rest of the world.

Article:

Both exports and imports hit record highs, but Japan's imports of clothes, smartphones and personal computers outpaced shipments from Japan. Imports jumped 25.1 percent to 12.55 trillion yen, compared with a 7.4 percent rise in exports to 9.71 trillion yen.

With the rest of Asia, Japan had a trade surplus of 1.30 trillion yen, while it posted a deficit of 876.55 billion yen with the European Union.

Ideas:

Of course the weak Japanese yen magnifies all situations, making exports seem more than what is normal and making imports, seem more than usual.

There always going to be positives and negatives related to global trade as every country that Japan trades might not always see trade surpluses. 

Countries always have to find ways to make sure they can maximize their strategies they best they can to find ways to ensure they can get the most out of their global trade. 

Th EU might be posting a deficit today but in six months it could be posting a trade surplus.

Trade runs in cycles to countries need to see the big picture and not panic about short-term trade deficits.

Article:

The outlook for export growth remains uncertain, economists say, amid monetary tightening in major economies.

"For exports, a weak yen in and of itself is a plus. There is a question mark over export growth because of recession concerns in the United States, where inflation is accelerating and (the Federal Reserve) is raising rates. And we have low-flying growth in China."

Ideas:

So while the weak yen is a boom to exporters there is always the challenges of higher prices related to consumers in other countries. 

As prices, inflation, continues to increase in other countries at some point there might be some diminishing returns for Japanese exporters where a combination of the weak yen, higher interest rates, and increased inflation is going to cause consumer spending and consumer demand for Japanese products to decrease.

At that point, the Bank of Japan will need to re-evaluate their monetary policy as maybe now it's beginning to affect Japanese exporters too much.

Have a nice day and be safe!