Japan Trade Surplus: Updated Oct. 31, 2023.

 Article Source:  https://mainichi.jp/english/articles/20230720/p2g/00m/0bu/020000c

Article:

TOKYO (Kyodo) -- Japan posted a 43 billion yen ($300 million) trade surplus in June, returning to the black for the first time in nearly two years amid robust U.S.-bound exports and falling energy import costs, government data showed Thursday.

For the first six months of 2023, resource-poor Japan ran a trade deficit of 6.96 trillion yen, though it was almost 13 percent lower than a year ago.

Ideas:

Exports are a major economic driver of the Japanese economy as global demand goes so goes Japan'e export sales. 

While China has been a major export destination for Japanese exports but the US has always been a stable export destination and especially now as China seems to have dropped off at the moment.

All export oriented economies were probably hit hard during the pandemic but Japan seems to have been able to comeback fairly strong.

Maybe energy prices are now beginning to decrease and Japan imports might not suffer too much in the future.

Article:

In June, robust U.S. demand for cars and construction machinery boosted Japan's overall exports by 1.5 percent to 8.74 trillion yen, the largest ever for the month. Imports dropped 12.9 percent to 8.70 trillion yen as those of crude oil, coal and liquefied natural gas all fell.

Exports tend to rise in June after overseas shipments slow in May when Japan has its Golden Week holiday period, according to analysts.

Ideas:

There is always a demand for Japanese cars as Japanese cars seem to be a stable export product for Japan to the US. Most likely Japan has a comparative advantage in producing construction machinery and or they have competitive prices and or quality products that US companies need and want.

Again, Japan is dependent on global prices when has a major impact on Japanese imports being a resource poor country.

The US dollar and Japanese variance also has a major effect on the yen being weak and the US dollar is strong.

If the Japanese yen wasn't as weak as it is now, maybe the imports prices wasn't be so high, and maybe it wouldn't be a burden for Japanese importers.

Article:

"It'll be difficult for export growth to accelerate when demand from China as well as the United States and Europe is all expected to stagnate," said Kota Suzuki, an economist at Daiwa Securities.

"China's recovery, in particular, has been slower than previously expected and it's unlikely that increased China-bound shipments will drive growth in Japanese exports," he added.

Ideas:

The problem and challenge for economics like South Korea and Japan is, and its natural, they become too dependent on one or two countries where they have good exports. For South Korea its China and the US and the same for Japan.

But the problem is China, for example, is having it own internal economic problems and maybe exports to that country from both South Korea and Japan are not going to be the same as in the past and or might take sometime for China to re-tool or revitalize its economy.

Even if the global economy begins to stagnate, it might not be significant related to the demand for different products. For example maybe demand for Japanese cars to the US might continue to be strong but other products might not be so strong.

Japan of course needs to continue to expand export markets that it hasn't been as significant in before. Of course its easier said than done, for example India is a major market that can should and can be expanded on. 

Article:

Japan's trade surplus with the United States expanded 37.4 percent to 817.50 billion yen as exports rose 11.7 percent to 1.74 trillion yen, a record for June, the Finance Ministry said in a preliminary report.

Imports slipped 4.2 percent to 921.29 billion yen as those of crude oil and wheat fell.

The country had a trade deficit of 442.83 billion yen with China, down 7.6 percent, as exports fell more than imports due to slackening demand for steel and chips in the world's second-largest economy.

Ideas:

It's good that exports to the US is very good, but at the same time, Japanese companies shouldn't be dependent only on US sales and they need to expand their market share in other countries whenever possible.

China seems to be in free-fall situation as its housing market seems to be overshadowing everything including its logistics sector.

Steel is a major construction raw material and as the construction industry is dependent on the housing market and or the building of all things, maybe now its in some kind of recession or stagnate growth period at this time.

Article:

Japan's trade balance with the rest of Asia came to its first surplus in two months of 280.80 billion yen while a trade deficit of 26.24 billion yen was reported with the European Union.

Japan has been at the mercy of surging energy import costs that have been magnified by the yen's weakness. The dollar has been strong against the yen, reflecting the widening interest rate gap between the United States and Japan.

Ideas:
Japan needs to continue to expand in the rest of Asia as it shouldn't depend on the US and or China too much. Maybe the Ukraine war has depressed exports to the EU at time too.

Unfortunately, Japan is always going to be at the mercy of import prices but of course the weak yen also increases import prices dramatically.

Japan and the US are using different strategies to combat inflation. The US is using the strategy of increasing it key rate while Japan is using the strategy, mostly, of letting inflation just run its course naturally.

But strategies seems to be doing much to reduce inflation but both are economies are not the same and maybe the same strategy might not work in both economics exactly.

Article:

Crude oil prices dropped 25.0 percent in June from a year ago in yen terms.

"The value of imports will likely be on a downtrend in line with falling commodity prices while export growth slows. In such an environment, Japan will likely report trade deficits going forward," Suzuki added.

Ongoing monetary tightening by the United States and other major economies has fueled worries about a global economic slowdown, which would be a blow to Japanese exporters that form the backbone of the world's third-largest economy.

Ideas:
Again, import prices are highly dependent on the yen, weak or strong, and or on global prices overall as Japan is very much a resource poor country and must import much of what it needs.

Japan needs to develop strategies, which it probably already has, of targeting key exports such as cars and make sure demand of those products continue to be strong despite the possibility of a global slowdown.

It can't depend too much on China at this time, but the US economy, despite global signs of slowing, continues to remain strong and if so, Japan should continue to target the US but at the same time, expand it key exports products in other global markets.

Article:

For the first half of 2023, exports gained 3.1 percent to 47.35 trillion yen, buoyed by cars, construction machinery and ships. Imports rose 0.7 percent to 54.31 trillion yen, with coal a major contributor.

Japan's first-half trade surplus increased 20.7 percent to 3.49 trillion yen with the United States while it saw a roughly 1.5-fold increase in its trade deficit to 3.65 trillion yen with China, according to the ministry data.

Ideas:

Perhaps in the future Japan should maybe consider more trade agreements with other countries as a way to expand trade, especially if the global economy begins to slow somewhat. 

Japan, compared to South Korea, has been slow to add more trade agreements, as a way of expanding trade, in non-traditional markets such as South American and more markets in Asia as needed.

Trade agreements might even make imports to Japan cheaper as maybe the trade agreement will bring lower import prices to Japan as a resource poor country.

And if the global economy is headed into recession or at least stagnation, trade agreements will might ensure better terms of trade for Japanese importers and exporters in the future.

Have a nice day and be safe!