Japan Current Account: Updated Oct. 29, 2023

 Article Source: https://mainichi.jp/english/articles/20230710/p2g/00m/0bu/004000c

Article:

TOKYO (Kyodo) -- Japan's current account surplus in May saw a nearly 2.5-fold increase from a year earlier to 1.86 trillion yen ($13 billion), helped by record investment returns for the month and a smaller trade deficit due to a sharp drop in energy imports, government data showed Monday.

Exports, a key driver of the Japanese economy, marked their first year-on-year drop in 27 months amid fewer shipments to China and concern about slowing global economic growth. In all, Japan's trade deficit shrank 38.8 percent to 1.19 trillion yen.

Ideas:

Japan has always had a strong current account and there is no concern that it is not going to change much in the future.

Global investment returns also help as the global economy and investing might be favorable for investors with higher returns due to increases in the key rate.

Exports, while a major economic driver of the Japanese economy, is usually strong as Japanese products such as car are always in demand with global customers.

The main challenge of course is what is going on in China with its economy now and  can Japanese products continue to be in demand, including intermediary products used to make other products.

Article:

The country was in the black for the fourth straight month, with returns on overseas investments a major contributor.

Japan saw a primary income surplus of 3.63 trillion yen, the largest-ever recorded for May, as rising overseas yields boosted interest earnings, according to the Finance Ministry.

In May, the value of exports dropped 2.8 percent to 7.24 trillion yen, while imports saw a larger 10.2 percent fall to 8.43 trillion yen, as energy imports ranging from crude oil, coal and liquefied natural gas declined.

Ideas:

Maybe Japan, and other economies are finally beginning to see the the beginning of the end of increased energy prices and maybe the situation can get back to some kind of normal or at least a new normal.

As the EU and the US keeps increasing it key rate, it might be a positive for global investors from Japan, which has its own key rate at almost zero, which is not much of an incentive for investors.

As Prime Minister Kishida has been talking about a major tax cut for the economy, in the latest Japanese diet session, it might be the key ingredient to finally get the economy back to strong growth again. 

But too early to expect much yet as all diet actions take a long time to work through and in end the final package might not look any that what was hoped for in the beginning.

Article:

Resource-scarce Japan has been hit by surging import costs of energy and raw materials, along with a weaker yen that has inflated their prices.

The dollar traded at 137.37 yen in May, 6.7 percent higher than in May 2022.

The yen's depreciation is seen as a plus for foreign travelers, who have more purchasing power. Japan has seen a revival of inbound tourism in recent months following the easing of COVID-related border control measures.

Ideas:

Japan is always going to be at the mercy of energy and material cost increases as its a resource poor country and always needs to import much of what it needs.

The weak yen is a positive for Japanese exporters and they can get more for their products in places like the US and the EU.

But they need to be careful because if the weak yen becomes too weak, it might make Japanese products too expensive compared to South Korean or Chinese products, which all produce and sell similar products.

Inbound tourism is now a major economic driver of the Japanese economy, but only if the yen weak can remain weak which means international tourists have more purchasing power to spend in Japan.

Article:

While Japan reported a bigger service trade deficit than a year earlier of 240.9 billion yen, its travel surplus increased nearly 8.5 times to 274.4 billion yen, the government's data showed.

A travel surplus means the amount of money foreign visitors spend in Japan exceeds spending by Japanese people overseas.

Ideas:

At the present time as the Japanese yen it weak, it means Japanese travelers have less purchasing power if they want to travel to another country for business or a vacation.

So of course they might buy US dollars, South Korean won, or the EU euro before they leave Japan, they still don't get that much and the same with the use of their credit cards used in another country.

As China as now opened up again, many Chinese tourists are now, again, going to travel to Japan and spend their income with a weak yen giving them more purchasing power to buy Japanese products and take them back to China.

A travel surplus means more in the current account which will support Prime Minister Kishida's plan to give a major tax relief package to Japanese citizens to help the economy grow consistently again.

Have a nice day and be safe!