Japan's Current Account:

Article Source: https://mainichi.jp/english/articles/20221208/p2g/00m/0bu/021000c

Article:

TOKYO (Kyodo) -- Japan posted a current account deficit of 64.1 billion yen ($470 million) in October, its first red ink in nine months, as the yen's recent weakness and rising oil prices inflated import costs, the Finance Ministry said Thursday.

The current account balance, one of the widest gauges of international trade, turned red in the reporting month from a 1.73 trillion yen surplus a year earlier, marking the sharpest drop on record, according to the ministry's preliminary data.

It was Japan's second current account deficit for October since comparable data became available in 1985, following a deficit of 16.2 billion yen logged in 2013.

Ideas:

For many years, Japan had a surplus current account, so most likely it's not a major challenge if it runs a deficit a month or two.

If the current account runs a deficit for a year, for example, then Japan could be facing some major economic challenges, but a month here or there of a deficit shouldn't be too much of a worry.

Now to be fair and honest, it could mean that exports are not doing do so well. For example, in South Korea, they also have been experiencing a 5 month deficit related to exports.

So maybe we are seeing or are in a global slowdown where exports in major exporting countries are not as good as needed for current accounts.

Article:

The country's goods trade deficit stood at 1.88 trillion yen, after imports totaled 10.86 trillion yen, up 56.9 percent from a year earlier for the 21st straight month of increase.

The values of both exports and imports were the highest on record for a single month, but that of imports surpassed exports by a wide margin amid the yen's slide against the U.S. dollar, according to the ministry.

The yen temporarily fell to the upper 151 level against the dollar in October, a 32-year low.

Ideas:

As noted, while exports and imports, in terms of value are still good, what about the total volume of imports and exports. 

For exports, the weak yen might be helping exporters, as they can get more for their products with a weak yen.

But the weak yen also makes imports much more expensive thus the wide margin between imports and exports because of the weak yen.

So a weak yen is both a positive and a negative for the Japanese economy overall,but which does the Bank of Japan place more priority on. It seems that maybe the Bank of Japan places more important of having a weak yen, to help exporters than helping importers with a lower yen to reduce import costs.

Article:

The value of imports was pushed up by surging crude oil, liquefied natural gas and coal prices, driven by Russia's invasion of Ukraine.

The price of crude oil soared 79.4 percent from a year earlier in yen terms, according to the ministry.

Exports grew 26.9 percent to 8.99 trillion yen, up for the 20th consecutive month, led by shipments of automobiles and semiconductors.

By region, imports from Asia and the Middle East rose notably, while exports to Asia and North America expanded in particular, the ministry said.

Ideas:

So Japan has a mixed bag of positives and negatives, as its exports seem to be increasing, because of the weak yen, but at the same time imports are also increasing because of the weak yen, which is driving up the price of oil, raw material costs, and of course food import costs.

So most likely the Bank of Japan, at the present time, is not going to do much about the weak yen or inflation as they keep saying its just a temporary situation. 

While it might seem temporary to them, it might not seem temporary to companies and households who are experiencing record level inflation with no end in sight of the increased price increases.

Article:

The deficit in services trade, including travel and cargo transportation, expanded to 722.4 billion yen from a year earlier.

The travel balance, which reflects money spent on goods and services by foreign visitors to Japan against the amount Japanese spent overseas, posted a 43.0 billion yen surplus, up from 18.2 billion yen logged a year earlier.

With the easing of COVID-19 restrictions, Japan accepted 498,600 foreign visitors in October, while 349,600 Japanese nationals left the country in the month, according to data from the Japan National Tourism Organization.

Primary income, which reflects returns on overseas investments, posted a surplus of 2.83 trillion yen, up 451.5 billion yen on year, due to an expansion of direct investment revenue.

Ideas:

With regard to travel and cargo transportation, it's a mixed bag again of positives and negatives.

The deficit in cargo transportation can easily be explained to again a weak yen increasing energy and oil costs and the services trade deficit most likely again has to do with the weak yen and inflation challenges.

With regards to travel balance most likely more international tourists came to Japan than Japanese who went overseas, because Japanese travelers didn't have the advantage of the weak yen as the yen was strong for them and they may be refrained from traveling overseas, while international travelers to Japan had the advantage of a weak yen, which means they could buy more for less in Japan.

Have a nice day and be safe!