Japan back in red with July deficit of 78.7 bil. yen as exports sag
TOKYO (Kyodo) -- Japan's trade balance fell back into the red in July with a deficit of 78.7 billion yen ($538 million) as exports dropped for the first time in over two years, raising uncertainty over economic growth prospects, government data showed Thursday.
Exports dipped 0.3 percent from a year earlier to 8.73 trillion yen as a rise in auto shipments failed to offset declines among other products like semiconductor-related equipment. Imports, meanwhile, fell 13.5 percent to 8.8 trillion yen, according to the Finance Ministry.
Ideas:
An economies current account related to exports brings money into the economy, while imports reduce the current account.
Semiconductor-related equipment manufacturers have stiff competition from Taiwan and South Korea, but at the same time, the semiconductor is wide open in that there are semiconductors made for everything and anything electrical including cars.
Imports most likely decreased, not on volume, but more because of the cost of raw materials and energy decreased.
Japan doesn't need to worry too much about being in the red for the current account, as it has had months even years of trades surpluses because of the high demand for Japanese cars.
Article:
The year-on-year fall in exports, the first since February 2021, cast a cloud over the outlook for the Japanese economy, which marked its fastest pace of growth since 2020 in the quarter to June.
The latest figures came a month after Japan reported its first trade surplus in nearly two years, though concerns persist about the impact of aggressive monetary tightening in the United States and Europe, and slowing growth in China.
Ideas:
It is normal, unfortunately, for the Japanese economy. One article of positive news and then a month later negative news about the economy.
The monetary tightening in the US and the EU might affect investors and or it could slow down exports some, but if Japanese cars are in high demand, it shouldn't be too much of a problem, even if cars sales a slower than usual.
The EU and the US are using different strategies than what Japan is using to decrease inflation. The Bank of Japan seems to be using a strategy of just letting inflation run its course, but the Japanese government is using subsidies related to energy costs to help households.
China is a different challenge and the Chinese economy might be going though a re-tooling period or re-structuring period for its economy.
Article:
Japan's trade surplus with the United States expanded 65 percent to 845.92 billion yen, as increased shipments of autos and heavy electrical machinery boosted exports by 13.5 percent to a highest-ever 1.79 trillion yen.
Imports dropped 11.2 percent to 945.31 billion yen, dragged down by liquefied natural gas and medicines, the preliminary data showed.
Ideas:
While its good that there is trade surplus with the US which means demand for Japanese products is still strong, Japan of course needs to continue to expand trade with other countries just in case the US market begins to decline, or goes into a recession.
Of course China was/is Japan'e largest trade partner but China is having it own challenges at this time.
Imports might have decreased, not because of a decrease in volume, but a decrease in the cost of energy and raw materials.
Anytime there is a trade surplus it increase the current account, which is good for the Japanese government to use money in important programs and it helps the Japanese yen/dollar situation.
Article:
China-bound exports fell 13.4 percent to 1.54 trillion yen and imports declined 13.9 percent to 1.90 trillion yen, translating into a 359.21 billion yen deficit, down 15.7 percent from a year earlier.
"While auto exports were robust because automakers have been boosting output amid the easing of chip shortages, overall exports are not strong as a trend," said Yuichi Kodama, chief economist at Meiji Yasuda Research Institute.
Ideas:
China continues to have its own structural challenges and who knows exactly when China will come out of it.
Auto exports, while not as strong as companies would like, the overall trend is actually good for Japanese car exports and sales.
Japanese cars are the main economic driver of exports in the Japanese economy and will be so for a very long time. While semiconductors are not as good yet, as Taiwan and South Korea have most the market share in semiconductors at this time.
Japan at the present time if building more semiconductor plants in Japan do boost domestic production of semiconductors.
Article:
"China's recovery since the end of its 'zero-COVID' policy was far slower than expected and there is the issue of the troubled real estate sector there. At home, inflation is weighing on demand, so it's difficult to expect strong economic growth to continue," Kodama added.
For more than a year, surging import costs for fuel and raw materials, partly because of Russia's war in Ukraine, left resource-poor Japan in the red.
Ideas:
China's recovery might not happen over time, as there are a lot of structural challenges for China to overcome. But with any fast growing economy, if an economy doesn't continue to innovate it begins to stagnant and seems to be what has happened to China.
South Korea is also stagnating as it too relies too much on big companies and exports and for the most part just a few important exports.
Japan, being a resource-poor country, to lessen the impact of relying on imports from countries, should develop some trade agreements, where it can get better trade terms related to the imports it needs.
Inflation might continue to increase in Japan for sometime and as a result, consumer spending and consumer demand might not be as good as it should be.
Article:
A weaker yen has exacerbated the pain for Japan by boosting the value of imports, accelerating inflation.
In July, the imported value of coal, crude oil and liquefied natural gas fell, while the yen was 4.6 percent weaker relative to the U.S. dollar than a year earlier.
Ideas:
A weak yen is usually good for exporters and not so good for importers. But the trick is the yen can't be too weak, as a weak yen drives up the price which makes Japanese products less competitive compared to Chinese and South Korean products.
But exporters, who still use Japan as it manufacturing base, still have to worry about the increased costs of raw materials and energy, which in the long run, could offset any benefits of the weak yen.
So there are always positives and negatives to a weak yen and exporting and importing, but it case the Bank of Japan might see the weak yen as a positive and it increase profits from overseas and while the weak yen is hurting imports the BOJ might be thinking the export benefits outweigh the imports negatives as this time.
Article:
The yen's depreciation against the dollar and the euro does not appear to have run its course, already slipping past levels at which Japanese authorities previously intervened to slow the currency's decline.
The Bank of Japan in July decided to allow long-term Japanese government bond yields to rise more, which would narrow the gap with U.S. yields as the Federal Reserve is in a rate hike cycle.
Ideas:
The Bank of Japan, for its part, as been slow to do anything about inflation and the weak yen, seemingly just letting both inflation and the weak yen to run its course.
Yes, the BOJ did let Japanese government bond yields to increase slightly but the move was not a full-fledged aim to intervention in the market.
The Bank of Japan is very slow, mostly on purpose, to do anything drastic in the market or economy at this time, as they don't want to do anything that might affect the financial markets.
Article:
With the rest of Asia, including China, Japan's trade surplus shrank 35.7 percent to 253.73 billion yen in July.
Japan had a 20.69 billion yen trade deficit with the European Union, as imports hit their highest level for the month amid strong demand for autos and aircraft equipment.
Imports gained 21.4 percent to 967.70 billion yen, while exports rose 12.4 percent to 947.01 billion yen.
Ideas:
At anyone time, Japan has many exports markets to look at carefully, and there are always some going to some doing good, such as the US, and some not doing so good. The key is keep focusing on the long-term and not focus too much on the short-term that might have decreases here or there.
Japan companies used to be long-term thinkers and always had long-term strategies for business. But as they have become more westernized and as they have allowed investors more control, they are only thinking short-term and not long-term.
Again the decrease in imports most likely had to do with the value of imports and not so much the volume of imports and global prices and the weak yen is playing havoc with imports prices.
Have a nice day and be safe!
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