Japan Trade Surplus: Updated Dec. 17, 2023

 

Japan's current account surplus triples to 2.28 tril. yen in August

 Article Source: https://mainichi.jp/english/articles/20231010/p2g/00m/0bu/014000c

Article：

TOKYO (Kyodo) -- Japan's current account surplus in August more than tripled from a year earlier to 2.28 trillion yen ($15 billion), helped by a decline in import costs that trimmed the resource-scarce nation's trade deficit and a revival of inbound tourism, government data showed Tuesday.

The country was in the black for the seventh straight month, according to a preliminary report from the Finance Ministry. The figure was the second-highest ever for August.

Ideas:

Japan's current account may tripled from a year earlier, which is of course good, but it has to be remembered just how much the Japanese current account lost value last year.

And add it the fact that imports prices were very high the past year, which also reduces current account. 

inbound tourism, for foreign tourists coming to Japan is good as it helps with economic growth as foreign tourists have move purchasing power, which means they can spend more for the value of their own currency.

In 2019 there were record numbers of foreign tourists, before the pandemic, and 2023 might not see a record but 2024 will probably be a record if the Japanese yen remains weak.

Article:

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

Japan's goods trade deficit shrank 69.5 percent to 749.5 billion yen after imports totaled 8.64 trillion yen, down 18.2 percent, and exports stood at 7.89 trillion yen, down 2.6 percent.

The pace of decline in imports was far quicker than that of exports, as the value of imported coal, liquefied natural gas and crude oil all fell.

Ideas:

International trade can be looked at from a value perspective or a volume perspective. In this case, because the value of imports decreased due to decreasing energy costs, in helped decrease the trade deficit, meaning the current account grew more. 

But, Japan is an resource-poor country, meaning it has to import much of what it needs, as as result, the current account is always going to be changing due to the weakness or strength of the yen, the value of imports and the value of exports.

Probably no country has as much emphasis on the current account as Japan which also watches exports more carefully than many other countries.

Exports might have been down, but it is related to value or related to volume as both measurements can affect the current account, depending on which value you favor.

Article:

The export decline, meanwhile, cast a pall over the economy, which has benefited from strong overseas demand in recent quarters.

Primary income, which reflects returns on overseas investments, registered a surplus of 3.64 trillion yen, down 8.0 percent.

Ideas:

If the export decline is related to the situation in China, then maybe Japan, as mentioned before, needs to put less emphasis on China, and more emphasis in other markets.

Remain in the Chinese market, and then eventually, as China re-structures its economy, and fixes is domestic economy challenges the Chinese economy will grow significantly again.

But at the same time, the US economy, as an example, is moving along just fine, and Japanese exporters to the US should not worry too much.

The EU might be different situation, as they have their own economic challenges that they have to overcome. 

Article:

The decline came after a drop in dividend payments failed to offset a gain in interest income amid higher overseas yields as central banks in major economies have been aggressively tightening monetary policy.

Japan saw a smaller service trade deficit of 302.9 billion yen than a year earlier, as the travel surplus registered a roughly 12-fold increase to 258.2 billion yen, the largest ever for August.

Ideas:

Most likely, the aggressive tightening that has taken place in the US and the EU might begin to slow down or even strop. For example, the US Federal Reserve has not increase it rate a while and each month recently, has said the are keeping the rate, as it, and no rate increases.

They have also indicated, as the US economy is getting better, and the inflation rate is decreasing, the are thinking about 3 rate decreases in 2024.

But its really too early to say just what that means for Japan as the Bank of Japan, might still keep it policy, as is, through 202, as they keep saying the Japanese economy is too too weak at the present time.

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

Japan is counting on the return of foreign travelers to help rejuvenate the tourism sector hit hard by the COVID-19 pandemic and aid the broader economy.

Ideas:

Japan needs a travel surplus as it increases economic growth and increases the current account at the same time. 

Again, 2019, was a record year for tourism, before the pandemic, while 2023 might not be record but it might be close as the the weak yen is a incentive for foreign tourists to go to Japan and spend their money, as the value of their currency is strong compared the weak yen.

But the key might be how many Chinese tourists go to Japan, as, for the most part, the Fukushima situation and Japanese seafood, still seems to be challenge for Japan and its image in China.

But at the same time, South Korean tourists seem to be flocking to Japan, as maybe they aren't worried about the Japan seafood situation.

Article:

The number of foreign visitors to Japan stood at 2.16 million, or 85.6 percent of the pre-pandemic level in August 2019, with a recovery trend intact following the easing of strict border controls.

While a weaker yen inflates import prices, it serves as a boon to foreign travelers by increasing their purchasing power. The dollar was 7.0 percent higher against the yen compared with a year earlier, and the euro was up 15.3 percent.

Ideas:

I went to Japan in 2019, both times in the fall, and there seemed like there were record numbers of tourists at Haneda International airport, with long lines at the immigration check-in counters.

The challenge might be, as many service companies, during the pandemic, had to lay-off their staff, some or many of them have not been able to rehire the same workers back, and many have are experiencing labor shortages.

At same time, many service companies, because they can only pay low wages close to minimum wage, many young people don't want to work those kinds of jobs any more preferring hi-tech type jobs or big company jobs that pay more.

But 2024, if the Japanese yen, continues to remain weak, and the Bank of Japan maintains its current low rate policy, 2024 could exceed the record of 2019.

The only challenge night be the continued high prices of airline tickets as airlines are still keeping prices high most likely due to high fuel costs and or they are still trying to make-up for losses during the pandemic.

Have a nice day and be safe!