Japan's April-Sept. current surplus triples to record 12.7 tril. yen
TOKYO (Kyodo) -- Japan's current account surplus in the first half of fiscal 2023 tripled from a year earlier to a record 12.71 trillion yen ($84 billion), lifted by record-high foreign investment returns as falling energy import costs trimmed the trade deficit, government data showed Thursday.
Primary income stood at 18.38 trillion yen, up 3.9 percent from a year earlier, as higher overseas yields and a weaker yen boosted the total. The figure was the highest since comparable data became available in fiscal 1985.
As energy prices dropped, the trade deficit for resource-poor Japan shrank 84.7 percent to 1.41 trillion yen, with overall imports down 13.2 percent at 51.03 trillion yen.
Ideas:
It must be remembered that in 2022, Japan still was in the midst of the pandemic albeit the end of the pandemic, so the economic situation might not have been the best in 2022.
High energy import prices has taken it toll on the Japanese current account as it take money out of the account compared to exports which but money into the current account.
The fact that there were record foreign investment returns shows that Japanese investors feel the global economy is in good shape and continue to invest in global areas.
The weak yen does have some positives even though it might not be good overall for the Japanese domestic economy.
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Exports were flat at 49.62 trillion yen, according to the preliminary data. Auto shipments, particularly to the United States, remained robust as the impact of parts shortages continued to ease.
The current account balance is one of the widest gauges of international trade. Japan's fiscal-half surplus fell sharply last year, as crude oil and other energy imports surged amid Russia's war in Ukraine and the global recovery from the COVID-19 pandemic.
The services deficit fell 29 percent to 2.33 trillion yen, but the travel surplus saw a roughly 15-fold increase to 1.65 trillion yen, a record on a six-month basis, as the number of foreign visitors to Japan jumped.
Ideas:
Japanese auto exports are a major driver of the Japanese economy, An economic driver is anything that significantly increases economic growth and in this case Japanese auto exports are a significant economic growth engine.
Unfortunately, Japan is a resource-poor country and has to import much of what it needs such as crude oil and energy. At the same time, Japan is at the mercy of global markets and also a weak yen, which increase prices on energy products and other products too.
The services sector and the service deficit is a little challenging to understand as to how Japan defines a services deficit. For example besides transportation and or travel, what else is included in services.
It easy to see the travel surplus as more foreign visitors entered Japan than Japanese leaving Japan. In new article, that just came out, 25 million foreign visitors entered Japan through December of 2023. Not exactly a record compared to 30 million in 2019, but 2024 for sure will probably exceed 2019, as long as the Japanese yen remains weak.
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A travel surplus means the amount of money spent by foreign visitors in Japan exceeds that spent by Japanese abroad.
A weaker yen gives foreign travelers more purchasing power. For Japan, it boosts the overseas profits of exporters but deals a blow to importers.
Compared with a year earlier, the yen was 5.2 percent weaker against the U.S. dollar and was down 10.5 percent against the euro as the Bank of Japan maintained ultralow rates at a time when its U.S. and European peers were hiking interest rates.
Ideas:
The challenge in 2024, for Japan and the Bank of Japan, is what does the Bank of Japan want and what does the Japanese government want. For example, the weak yen significantly increase foreign visitors to Japan, but at the same time, might not be good for the domestic Japanese economy.
So the Bank of Japan has to decide if and when to increase the key rate, which might affect the strength of the Japanese yen, which could mean foreign visitors might not have as much purchasing power in Japan as they do now.
A weak yen is good for Japanese exporters too, as it increases profits of exports, So the Bank of Japan has to look at that too in relation to increasing the key rate in the future.
Perhaps, if possible, there might be a compromised Japanese yen that doesn't affect the purchasing power of foreign visitors, its still good for Japanese exports, and helps importer too with a little stronger Japanese yen.
Article:
In September alone, the current account surplus more than tripled to 2.72 trillion yen, as the goods trade balance returned to the black.
The surplus came to 341.2 billion yen after imports dropped 18.1 percent to 8.72 trillion yen, while exports grew 2.6 percent to 9.06 trillion yen.
Primary income shrank 1.1 percent to 3.08 trillion yen.
Ideas:
The Japanese current account is like a country's bank account, as exports bring money into the current account, as does foreign visitors who spend money in Japan, while imports take money out of the Japanese current as they buy things from overseas and have to pay for them.
The challenge has been the weak Japanese yen, which increases the price of imports, and the price of products in the domestic Japanese economy.
So the again, in 2024, the Bank of Japan has to decide what is best for the Japanese economy. A weak yen, as it is, or a little stronger Japanese yen , that might balance the major factors, such as foreign visitors, exports, imports and the Japanese economy.
Its not going to be easy to try and figure out to balance out the major factors that are in play in the Japanese economy.
Have a nice day and be safe!
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