Japan's Current Account: Update Nov. 22, 2023.

Japan current account surplus up 3-fold in July

 Article Source: https://mainichi.jp/english/articles/20230908/p2g/00m/0bu/024000c

Article:

TOKYO (Kyodo) -- Japan's current account surplus expanded more than threefold in July from a year earlier to 2.77 trillion yen ($19 billion), a record for the month, boosted by declining crude oil prices that helped reduce imports, government data showed Friday.

The current account balance, one of the widest gauges of international trade, remained in the black for the sixth straight month, also lifted by an increase in foreign visitors to the country, according to the Finance Ministry.

Ideas:

An economies current account is like an economies bank account, as exports put currency into the current account and imports take money out of the account.

It possible, that exports might not have been that strong, but import prices decreased enough to show a record current account surplus. as imports values, in the past,  have been too strong because of inflation.

The key will be in the future, as to what is really happening with exports and global demand, especially related to China.

Article:

Japan posted a goods trade surplus of 68.2 billion yen, a turnaround from the hefty 1.18 trillion yen deficit a year earlier, as imports shrank 13.3 percent to 8.49 trillion yen amid declining crude oil and other fuel prices.

Exports dipped 0.6 percent to 8.56 trillion yen, partly affected by declining shipments of semiconductor-making equipment.

Ideas:

Exports in Japan make up about 20 percent of Japan's GDP, while not that much but still enough to affected economic growth.

Imports in Japan are heavily influenced by both global prices and the US Federal Reserve key interest rates.

Semiconductor shipments might still be influenced by parts shortages as parts shortages have been affecting the market since 2020.

Article:

Primary income, which reflects returns on overseas investments, posted a surplus of 3.58 trillion yen, up 15.7 percent, boosted by securities investments earnings, the ministry said.

Japan's travel surplus came to 336.8 billion yen, the biggest for July since comparable data became available in 1996. A travel surplus means the amount of money spent by foreign visitors to Japan exceeds that spent by Japanese abroad.

Ideas:

Because the variance between the US dollar and the Japanese yen it is a positive for Japanese overseas investors.

Foreign investors to Japan continue to take advantage of the weak Japanese yen, which provides more purchasing power for foreign investors. 

At the same time, the Bank of Japan might think the weak Japan yen is a positive for the Japanese economy while it might not be good for importers but it helps exporters.

Article:

The number of foreign visitors has been increasing as Japan has seen a revival of inbound tourism in recent months following the easing of COVID-related border control measures.

Japan's services trade deficit shrank 34.2 percent to 535.5 billion yen.

Ideas:

Again, the Japanese government has probably figure out that foreign visitors are good for economic growth, as they now realize that foreign visitors bring bring in money into the Japanese economy. 

Trade services maybe its also about Japanese overseas travelers as the weak Japanese yen compared to the strong US dollar has become an incentive not to travel overseas for Japanese travelers.

In 2023, foreign visitors might not reach a record level but for sure 2024 might see record numbers might happen again.

Have a nice day and be safe!