Japan Trade Deficit: Updated Jan. 27, 2024

 

Japan's trade deficit shrinks to $4.4 billion in Oct.

Article Source: https://mainichi.jp/english/articles/20231116/p2g/00m/0bu/029000c

Article:

TOKYO (Kyodo) -- Japan's trade deficit in October shrank 70.0 percent from a year earlier to 662.5 billion yen ($4.4 billion) as imports continued to drop sharply and exports grew for the second straight month, government data showed Thursday.

It was the first red ink in two months, as exports increased 1.6 percent from a year earlier to 9.15 trillion yen, a record high for the month, but growth slowed from a 4.3 percent rise in September affected by a deceleration of the Chinese economy, according to the Finance Ministry.

Imports dropped 12.5 percent to 9.81 trillion yen, down for the seventh month, reflecting price falls for coal, liquefied natural gas and crude oil, the ministry said in a preliminary report.

Ideas:

The trade deficit or trade surplus are the most watched economic indicators, in countries that rely heavily on trade. In the US, its not talked about that much but in Asia trade or international trade seems to be very important.

A trade deficit reduce a county's current account while a trade surplus increases the current account. The current account is like a country's bank account.

Imports reduce the current account while exports increase the current account, and as Japan is a trade dependent country, exports are very important for the Japanese economy.

Japan also is a resource-poor country and has to import what of what it needs, As a result, Japan is at the mercy of global prices along with global shipping.

Article:

Japan had a trade surplus of 915.16 billion yen with the United States, hitting a record high for the month, as exports expanded 8.4 percent on robust shipments of automobiles. Imports dropped 4.5 percent to 1.01 trillion yen.

Meanwhile, Japan logged a 674.3 billion yen trade deficit with its largest trading partner China, remaining in the red for the 31st straight month.

Food exports to China tumbled 55.0 percent amid a blanket import ban on Japanese seafood after Japan started discharging treated radioactive water from the crippled Fukushima nuclear plant into the sea from August.

Ideas:

Trade with the US seems to be the bright spot for Japanese exports and Japanese cars, for the most part, are an economic driver, meaning its a significant export that increases economic growth.

China is having its own internal economic challenges and maybe not just Japan, but other countries are also having challenges related to exports to China.

And then there is the Japanese seafood import ban, meaning China as banned all Japanese seafood because of the Fukushima situation.

At the same time, many Chinese tourists continue to arrive in Japan, and they eat Japanese seafood such as sushi.

The drop in imports probably has nothing to with the volume of imports to Japan from the US but related to the value, price, of imports.

Article:

Japan's overall exports to China dropped 4.0 percent to 1.65 trillion yen for the 11th consecutive monthly decline, led by sharp falls of electric components and steel, while imports declined 2.9 percent to 2.33 trillion yen.

"Looking ahead, Japan's trade deficit is on the mend, more than halving from over 1 trillion yen earlier this year" as import costs had been trending downward recently, said Kazuma Kishikawa, an economist at Daiwa Institute of Research.

But the risk of rising import costs remains due to the recent depreciation of the yen, which was 2.6 percent weaker relative to the U.S. dollar compared with a year earlier, as well as surging oil prices last month since the outbreak of the Israel-Hamas war in the Middle East, Kishikawa said.

Ideas:

Japan's exports to China, in 2024, might not improve that much as the Chinese economy, seems to be going through a significant changes, as it transitions from a developing economy to close to an advanced economy.

Japan's trade situation might be on the mend, with trade deficits getting less and less, but at the same time, Japan can't be complacent, as they must continue to work on markets beside the US and China.'

Import costs are always going to be a major challenge for the Japanese economy due to the fact it Japan has to import much of what it needs. 

At the same time a weak Japanese yen or currency doesn't help with imports prices as a weak yen increases import prices and a weak yen also increases export prices for Japanese companies selling their products globally.

Article:

With the rest of Asia, including China, Japan's trade deficit decreased by 62.5 percent to 63.53 billion yen, the first red ink in two months, as exports dropped 5.3 percent and imports shed 7.2 percent.

Japan was in the red for the 15th straight month with the European Union, registering a trade deficit of 86.63 billion yen. Imports shrank 5.6 percent and exports grew 8.9 percent.

Ideas:

Here is the international trade data for October, provided by the JETRO organization in Japan.

https://www.jetro.go.jp/ext_images/en/reports/statistics/data/gaikyo202310e_rev.xls

As Japan moves away from the pandemic situation, international trade and specifically trade deficits will continue to decrease for Japan.

At the same time, one must not place too much emphasis on month to month trade deficits and focus on quarter to quarter or even year to year, even trade deficits go through the business cycle situation meaning there are going to periods of good growth and periods of not so good growth.

But again, for countries like Japan, which places a lot of importance on international trade trade surpluses and trade deficits are watched very carefully and get a lot news compared to the US, which doesn't seem to talk much about international trade.

Have a nice day and be safe!