Japan's Current Account: Update Nov. 9, 2023.

 Article Source:  https://mainichi.jp/english/articles/20230808/p2g/00m/0bu/021000c

Article:

TOKYO (Kyodo) -- Japan posted a current account surplus of 8.01 trillion yen ($56 billion) in the first half of 2023, up 11.1 percent from a year earlier due to a smaller trade deficit and record foreign investment returns aided by a weaker yen, government data showed Tuesday.

The improvement came as the current account surplus in June roughly tripled from a year earlier to 1.51 trillion yen, after the resource-scarce nation recorded its first trade surplus in nearly two years.

Ideas:

Trade surplus are good but they can't really be relied on, as trade is never linear as there are going to periods of surpluses and deficits in different years, depending on the global economy.

The weak yen, not only helps Japanese export companies getting more for their products but Japanese foreign investments get more because the weak yen.

The weak yen can have both positives and negatives depending on what side of the equation you are on.

For foreign Japanese investors and Japanese exporters the weak yen is a positive but for Japanese importers its a negative.

Article:

The current account balance is one of the widest gauges of international trade.

Surging import costs for energy, raw materials and other goods have left Japan deep in the red, despite a recovery in exports as COVID-related supply disruptions eased.

In the January-June period, the country's goods trade deficit narrowed 8.3 percent to 5.18 trillion yen, as import growth slowed while increased auto shipments lifted overall exports.

Ideas:

Even though Japan has seen some red situations, trade deficits, international tourism, for travelers to Japan, might be reducing the trade deficit and foreign tourists spending money in Japan that counts as a positive for the trade, as it bring money into Japan, because of the weak yen.

Car exports are a major economic driver of growth in the Japanese economy as demand for Japanese cars, in the US remain strong.

Even with a trade deficit of 5.18 trillion yen, Japan still is one of the biggest spending economies in the world.

Japans debt to GDP is one of the highest if not the highest in the world globally, which might indicate its not too concerned about how much debt it has.

Article:

Imports rose 0.9 percent to 52.58 trillion yen, in line with the easing of crude oil prices in yen terms, while exports grew 2.0 percent to 47.40 trillion yen, the Finance Ministry said in a preliminary report.

Primary income, reflecting foreign investment returns, stood at 17.53 trillion yen.

The dollar averaged 134.92 yen in the six-month period, 9.6 percent higher than a year earlier.

Ideas:

As Japan is a resource poor country, it has to import more products than other countries which means it might be more challenged when the Japanese yen is weaker than normal.

So most likely import products were 9.6 percent higher than normal and then add in price increases of whatever is imported into Japan.

The US dollar at 134.92. is really not that good or bad, but many articles always talked about the US dollar reaching the 140+ barrier.

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A weaker yen inflates the overseas earnings of Japanese companies and investment returns in yen terms, while also boosting import costs.

The yen's depreciation, which increases the purchasing power of foreign visitors to Japan, has coincided with a revival of inbound tourism after the easing of strict border controls implemented in response to the COVID-19 pandemic.

Japan's travel surplus increased more than 12-fold from a year earlier to 1.61 trillion yen, helping trim the services deficit.

Ideas:

Japan is smart in opening to tourists again as the weak yen gives tourists more purchasing power which might be a major incentive to travel to Japan.

It also improves economic growth when maybe domestic consumer spending is not at the level yet to where it can help improve the economy.

And as China has now opened again, many Chinese are traveling and going and spending their money in Japan, and buying seafood despite the Chinese ban on Japanese seafood.

Article:

A travel surplus means the amount of money spent by foreign visitors to Japan exceeded that spent by Japanese abroad.

With aggressive interest rate hikes in major economies apart from Japan, there is lingering concern over the outlook for global economic growth and Japanese exports. While cost-push inflation persists, resilient domestic demand and the revival of inbound tourism have aided the world's third-largest economy.

Ideas:
As the Japanese yen is weak, it might not be the best choice for Japanese to travel at this time as if they go the the EU or the US, the strong dollar and strong Euro is a disadvantage to Japanese tourists.

The global economy, so far, seems somewhat OK, but the war situation in the Ukraine and other areas of concern might be negatives for the global economy.

Japanese companies keep passing on their increased costs to the next in the supply chain, including the final customer, but Japanese consumers seem to not think too much of it yet.

Article:

Japan's 1.51 trillion yen current account surplus in June was largely due to a 328.7 billion yen trade surplus, its first since October 2021, the ministry data showed.

Exports rose 0.5 percent to 8.63 trillion yen, while imports fell 14.3 percent to 8.30 trillion yen.

The primary income surplus was 1.68 trillion yen.

Ideas:

Japan compared to other nations is most concerned about its trade situation, while the US always runs a trade deficit as it imports more than exports overall.

So different countries place more emphasis on different trade situations. Countries like South Korea, Japan, and the northern European countries, which have smaller populations, smaller domestic markets rely heavily on trade for its current account.

Japan has a population of 125 million, give or take a million, but its still heavily dependent on trade. 

Have a nice day and be safe!