Japan Overall Trade Deficit:

 Article Source: https://mainichi.jp/english/articles/20230216/p2g/00m/0bu/026000c

Article:

TOKYO (Kyodo) -- Japan posted its largest-ever trade deficit of 3.5 trillion yen ($26 billion) in January after energy import prices jumped and export growth slowed, with record red ink logged with major trading partner China, the Finance Ministry said Thursday.

The deficit, roughly a 1.6-fold increase from a year earlier, exceeded the previous record of 2.82 trillion yen in August last year, highlighting the vulnerability of the resource-poor country that relies on other nations for energy.

Japan logged red ink for the 18th consecutive month, according to the ministry.

Ideas:

The Bank of Japan must know that the trade deficit is decreasing Japan's current account yet it still keep the same ulta-low policy. 

The BOJ must have it reasons compared to what the US and the EU is doing with it interest rates.

As far as energy goes, Japan needs to find a different strategy that ensures its energy costs don't keep causing concern for the economy, such as depleting the current account related to the variance between US interest rates and the Japan interest rate.

Of course there is always the idea just how much should a government intervene in a market economy and or not enough intervention is always a challenge to do or not do.

Article:

China's Lunar New Year holidays began in January, earlier than in recent years, likely contributing to Japan's biggest trade deficit with the country of 1.42 trillion yen. China-bound shipments tend to decline during the holiday period.

In January, total imports surged 17.8 percent to 10.05 trillion yen, boosted by coal, liquefied natural gas and crude oil, according to the ministry's preliminary report.

Exports rose 3.5 percent to 6.55 trillion yen, helped by U.S.-bound cars. The values of both imports and exports were the highest for the month of January since comparable data became available in 1979.

Ideas:

Like most countries, economies with long holiday periods, probably many factories in those countries shut down or just have minimal production during the holiday period.

The value of imports to Japan was obviously influence by the variance between the US interest rate and the Japan rate which causes the Japanese yen to be weak resulting in higher import prices compared to normal situations.

The values might have been the highest in January since 1979 but it important to remember that Japan might still be recovering from a slow-down during the pandemic and is still not back to the 2019 level.

Exports also benefit from a weak currency and most likely its value too was nominal compared to what it would have been if the rate was normal and not weak.

Article:

Slowing export growth is a worrying sign that the global economy is losing strength amid aggressive interest rate hikes in major economies.

"The fall in Chinese exports may be a seasonal factor but we'll need more data to see if that's the case. What's worrying is export volumes to the United States and Europe are not doing well, and slowing economic growth may be inevitable in these economies toward mid-2023," said Chisato Oshiba, an economist at Dai-ichi Life Research Institute.

"The surge in commodity prices and the yen's rapid depreciation seen last year may be over, reducing import costs. Crude oil prices have fallen but they are still at high levels and could stay there," Oshiba added.

Ideas:

It's important to see the big picture or the entire global economy but there are different sectors or industries that don't always align with each other. Some sector or industry might be doing better than another sector such for Japan cars to the US might be doing good but another area or industry might not be doing as good.

The same goes for different countries. China might be slowing not so good now but exports to the US might be doing better.

At the same time as the US and the EU continue to increase its key interest rate, as supposed-way to reduce inflation it might mean less spending which might mean less less exports to those countries over time.

But it also important to know from quarter to quarter situations can change quickly. So even though Q1 might be low for exports Q2 could be much better and so on.

Article:

Japan's exports to China dropped 17.1 percent to 967.45 billion yen, while imports rose 12.3 percent to 2.39 trillion yen.

Japan eked out a surplus of 280.68 billion yen with the United States, another major trading partner for Japan.

Exports to the United States increased 10.2 percent to 1.23 trillion yen, compared with imports that grew 21.5 percent to 950.36 billion yen, the highest amount for the month of January.

Ideas:

Most likely the China situation is a combination of continued logistics challenges and weak demand for Japanese products. It's not easy to see which had the most challenges as it's not easy to get complete information related to what is happening in China sometimes.

Exports to the US, while not great is still good with a 10.2 percent increase. But again a weak yen might be inflating the value of exports so the real value might be less.

For imports from the US to Japan again the weak yen is inflating the prices of products and not reflect what the real value of imports should be.

So the exchange rate was more normal the differences between exports and imports might be even more, but it's hard to say exactly what the real difference would be.

Article:

Japan had a trade deficit with the rest of Asia, including China, of 1.38 trillion yen, while it registered a deficit of 173.79 billion yen with the European Union.

The U.S. Federal Reserve has been hiking interest rates aggressively to fight inflation and the same is true in the eurozone.

Japan is still far from monetary policy tightening but financial markets are rife with speculation that the Bank of Japan's ultra low rate policy will be tweaked if academic Kazuo Ueda is approved by parliament to become the central bank's next governor.

Ideas:

It's not easy to speculate or guess which Japan has a trade deficit still with the rest of Asia other than maybe because of its deficit with China it overshadows the rest of what Japan does with the other countries.

Trade deficits are not all bad but with the currency exchange being weak and many countries trading in or use US dollars for their trading that could be a factor sometimes for the trade deficit.

Most likely it could just be a weak global economy and demand or trade overall has not returned to the 2019 level yet. 

Of course the Japanese weak yen but be part of the challenge too and the weak yen means Japanese products become more expensive in other countries so the refrain from buying until the exchange rate in favor with that country.

Article:

The policy divergence between Japan and the United States has sharply weakened the yen against the dollar. While the intense selling pressure has eased somewhat, the Japanese currency remains 15 percent lower than in January 2022.

"It may be an indication that export growth supported by pent-up demand (in the United States and Europe) is taking a breather. The impact of rate hikes has yet to be fully seen," said Kota Suzuki, an economist at Daiwa Securities Co.

"Despite the easing of China's 'zero-COVID' policy the outlook for its economy is not rosy with simmering real estate woes. Japan's trade deficit will likely shrink in the coming months, but it will be difficult to return to the black," Suzuki said.

Ideas:

The weak yen might be a challenge for some US companies that want to buy Japanese products. 

The US has always been a consumer oriented consumer buying culture. And yes, maybe after two years and or a year since the pandemic really ended pent-up demand as has eased somewhat and consumers and companies are taking a breather before the summer buying season begins in full force.

Even at 15 percent below it normal level, or lower that 2022 its still low enough to have an effect on import and export prices overall.

China might be trying to get past the pandemic situation or get past it own pandemic roadblocks but will take some time before China can overcome it internal domestic economic challenges. 

As far as the Japanese economy goes, while it might be moving or has move out of the pandemic situation its economy is always both in a state of concern with low consumer buying, d a high ageing society and young people not buying like US young people. 

And then add in the wage challenge in Japan compared to inflation and Japan has a set of continuous challenges it has to overcome in the future

Have a nice day and be safe!