Japan trade deficit in fiscal 1st half falls 75% to $18 billion
TOKYO (Kyodo) -- Japan's trade deficit in the first half of fiscal 2023 declined 75.1 percent to 2.72 trillion yen ($18 billion), as imported energy costs fell after surging amid Russia's war in Ukraine and a tumbling yen, while exports grew to a record high, government data showed Thursday.
The resource-scarce nation was in the red for the fifth straight year on a first-half basis, with the outlook for export growth increasingly uncertain amid weakening demand in China and aggressive monetary tightening in the United States and Europe.
Ideas:
A country's current account is like a country's bank account as exports bring money in and imports take money out of the current account.
Energy costs, maybe worldwide have been very high the past two years, and now, maybe, they are finally beginning to decrease.
The weak Japanese yen is both a positive and a negative, depending on whether you are a Japanese exporter or a part of the Japanese domestic market.
For example, for Japanese exporters, a weak yen, means exporters can get more for their Japanese products in overseas markets.
For the domestic market and importers, the weak yen increases the price of import products going into Japan.
Exports might have reached a record high, but the continued trade deficit shows the current account is still not where it should be, if trade deficits are a challenge for an economy.
The Chinese economy is probably going through some growing pains as it begins to transition from an emerging economy to eventually an advanced economy, and it could take several years for the transition to finalize.
As far at the EU and US monetary tightening is concerned, the US has suggested that in 2024 it might begin to lower the key rate, as the US economy is improving and inflation is beginning to decrease.
If the US does reduce the key interest rate, most likely the EU will do same in 2024.
Japanese export and exporters don't need to worry too much, especially if they export to the US market.
Article:
Imports came to 52.96 trillion yen, down 12.4 percent, as the value of crude oil, liquefied natural gas, and coal all declined. Exports stood at a record 50.24 trillion yen, up 1.4 percent, helped by robust auto shipments to the United States, the Finance Ministry said in a preliminary report.
The Israel-Hamas war has heightened tensions in the oil-producing Middle East, leaving financial markets on edge over geopolitical risks.
Ideas:
The value of the imports might have decreased, which is good, but what is the overall volume of imports, did it increase or decrease overall.
Again, despite continued inflation in the US, despite it beginning to decrease, if appears that consumers are still buying Japanese cars and most likely all brands of cars.
The financial markets are always on edge as the Middles East is always struggling with geopolitical risks and it looks like its not going to change anytime soon.
The oil producing countries in the Middle East, if they haven't yet, could use the current situation as an excuse to increase oil prices.
Article:
As most of Japan's crude oil imports come from the region, analysts say higher prices, coupled with the yen's persistent weakness, may mean bigger trade deficits for the nation in the coming months.
Japan registered a massive 10.91 trillion deficit in the April-September period of 2022, the highest since comparable data became available in 1979, underscoring the vulnerability of a nation heavily reliant on imports to meet its domestic energy needs.
Ideas:
What Japan needs, if it hasn't done it yet, is maybe some trade agreements with some oil producing countries to get better oil prices because Japan is a resource-poor nation and needs to import much of what it needs.
The Bank of Japan, with its ultra-low monetary policy, might be letting the yen remain weak as it benefits Japanese exporters and it is an incentive for foreign tourists to come to Japan and spend money.
Of course the weak yen doesn't benefit Japanese importers or the domestic economy but maybe the Bank of Japan, at this time, thinks the ultra-low policy is best for the economy.
Japan as an export country is always focused on trade deficits and trade surpluses. While for the most part, before the pandemic, Japan had a lot of trade surpluses, which benefitted the Japanese current account.
But since the pandemic, it seems to be running mostly trade deficits, and part of the reason for the trade deficits it the weak yen due to difference in the US key rate and the the Bank of Japan still using the ultra-low policy, which seems to keep the yen weak.
Article:
"U.S. economic growth remains solid for now. The economy may be headed for a soft landing but growth of Japan's export to the United States will likely slow sooner or later. And there is China, whose outlook is far from optimistic because of real estate problems," said Yuichi Kodama, chief economist at Meiji Yasuda Research Institute.
"For Japan's trade data, how energy prices will move (amid the Middle East tensions) is an important factor to watch at a time when we can't expect a reversal of yen weakness as U.S. interest rates will remain elevated," Kodama added.
Ideas
The US does appear to be headed for a soft landing as inflation is decreasing but there is no real signs of a recession for the US economy, as it seem the US economy is on solid ground as this time.
Exports sometimes are not linear, meaning continuous growth, as there might be periods of excellent growth, periods of somewhat good growth, and periods of less growth depending on consumer demand and the demands of sellers in the US, for example.
Again, the Chinese economy has some real structural challenges to overcome, including the real estate challenges and the beginnings of moving from a emerging economy to eventually an advanced economy.
US interest rates will remain elevated, but in 2024 the US Federal Reserve, the US central bank, has suggest it might do three rate cuts, as the US economy continues to improve and most important, inflation continues to decrease.
The situation with energy prices is somewhat hard to predict and its quite possible, that energy producing countries in the Middle East might use the current situation in Israel as an excuse to increase oil prices.
Article:
Auto exports reached a record level, buoyed by robust U.S. demand as chip shortages that had forced automakers to cut output eased.
Japan's exports to the United States grew 10.6 percent to a record 10.08 trillion yen, while imports fell 6.0 percent to 5.59 trillion yen, translating into a 4.49 trillion yen surplus.
Japan's trade deficit with China continued to expand, hitting 2.87 trillion yen as exports fell more than imports, in a worrying development as the latter's recovery from the COVID-19 fallout has been lackluster and real estate woes persist.
Ideas:
Chip shortages might have caused Japanese car makers, in Japan and the US, to reduce output and maybe now they are just getting back to normal as exports seem to show.
The decrease in imports might be related a slight strengthening of the Japanese yen, as a weak yen might bring higher imports prices to Japan.
A strong demand for Japanese exports and as the Japanese yen, maybe wasn't as weak, resulted in a current account surplus for the Japanese economy.
It seems that the pandemic has caused some real challenges for the Chinese economy, and they aren't able to move past their challenges at this time.
As mentioned before, Japanese exporters to Japan, should stay the course, but at the same time, focus on other markets to ensure sales and profits continue.
Article:
Exports declined 8.2 percent to 8.91 trillion yen, compared with imports that dropped 6.2 percent to 11.77 trillion yen.
With Asia, including China, Japan's trade surplus shrank by 23.4 percent to 989.74 billion yen, and its deficit with the European Union more than halved from a year earlier to 401.44 billion yen.
In September alone, Japan eked out a 62.44 billion yen trade surplus as exports grew for the first time in three months.
Ideas:
The Asian market is more than just China, and Japanese exporters should maybe, for now focus more on the rest of the Asian market and less on China until it recovers from its current challenges.
That's not to say Japanese exporters should give up China, but again, stay the course in China, but focus more on other Asian markets too.
The European Union has it own challenges at this time, just as the continued Ukraine war situation, as such might take some time for the EU to get back to normal, what ever normal is.
Japan always seem to be focused on trade data and exports and imports. Despite that, its still the 3rd largest economy, at this time, but India is coming up fast and may eventually pass Japan.
Article:
Car shipments to the United States and Europe propelled overall exports to a record high of 9.20 trillion yen, up 4.3 percent. Imports dropped 16.3 percent to 9.14 trillion yen.
Food exports to China tumbled 58.0 percent, partly reflecting its ban on seafood imports from Japan following the release of treated radioactive water from the crippled Fukushima Daiichi nuclear power plant. No further breakdowns were released.
Japan ran a 955.07 billion yen trade surplus with the United States but recorded a deficit with China of 570.96 billion yen for the 30th straight month of red ink, the data showed.
Ideas:
Car shipments to the US and the EU might be back to normal, finally, after a few years of chips shortages and supply chain disruptions.
The US, for the most part, has never been a trade surplus country, as it gets more imports from other countries compared to exports. Yes, it does export to other countries but the trade difference is huge.
As far as China is concerned, at its Japanese seafood ban in China, Chinese tourists to Japan don't seem to care about the ban as they, like all tourists, are eating Japanese seafood, such sushi and sashimi, and they don't think about it once in Japan on vacation.
Is the 39th straight month, of red ink, meaning a trade deficit, it that for Japan overall or is it just for China.
Again Japanese exports more to the US than the US imports to Japan as maybe either because the geographic size of Japan compared to the US and because there is not the demand for US products that much compared to demand for Japanese products in the US.
Article:
Japan's economy has received a boost from export growth in recent quarters, with a revival of inbound tourism also lending support.
In the six months to September, the dollar was 5.6 percent higher against the yen, as the Bank of Japan has stuck with ultralow rates while the Federal Reserve has raised interest rates to tame inflation.
Ideas:
Back when late Abe was the Japanese Prime Minister, he opened the country up to more tourists, as a way to improve economic growth and it seemed to work with maybe 30 million tourists that came to Japan in 2019, before the pandemic.
The last figures say 24 million tourists in 2023 have come to Japan, not quite a record year, but maybe as the Japanese yen remains weak there could be a record year in 2024.
The weak yen against the US dollar give foreign tourists more purchasing power, meaning
But again, in 2024 as the US Federal Reserve has suggest it will increase the rate, the Japanese yen might not be quite so weak, but still weak.
Article:
A weak yen increases import costs, a major factor accelerating Japan's inflation for over a year.
"Given recent rises in crude oil prices and the yen's depreciation, Japan will likely remain in the red for some time," said Kota Suzuki, an economist at Daiwa Securities.
Ideas:
The Bank of Japan might be looking at the positives and negatives of a weak yen, and at this time, might just be thinking a weak yen is better for the overall economy, despite a weak yen causing import prices to be higher than normal.
For example, a weak yen benefits exporters and Japan always seems to place a lot of emphasis on exporting compared to importing.
The US, for examples, always runs a trade deficit and its economy is doing just fine with a continue trade deficit.
But anytime Japan has a trade deficit their worry and concern and maybe for good reasons, as a trade deficit decreases the current account while a trade surplus increase the current account.
Have a nice day and be safe!
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