Japan Current Account: Updated Feb. 15, 2024

 

Japan logs record $17.9 billion current account surplus in Oct.

Article Source: https://mainichi.jp/english/articles/20231208/p2g/00m/0bu/022000c

Ideas: 

A country's current account is like a country's bank account, as exports add to the account and imports take away from the account.

Japan appears to place a lot of emphasis on the current account as its an important indicator for international trade, which is important for Japan as export driven economy.

Japan is also a resource-poor country, and as result has to import much of what it needs, which means it is at the mercy of global prices, such as energy, gas, and oil.

Inbound tourism, or foreign tourists, have become a major economic driver for the Japanese economy, as more and more foreign tourists go to Japan and spend a lot, sense the Japanese is weak, against the US dollar and Euro, and other currencies, which means they have more purchasing power for their money.

In 2019, before the pandemic, there were maybe 30/31 million foreign tourists that entered Japan. 2023, might not see a record, but it the trend continues 2024 looks like a record, but it all depends on the Japanese yen remaining weak, which favors tourists going to Japan.

And of course a weak yen, doesn't favor Japanese tourists who want to travel to Europe or even the US as then the US dollar is strong, which means Japanese tourists to the US or Europe have less purchasing power, which means their Japanese money has less power.

The real challenge is what is the Bank of Japan going to do about its ultralow policy with its negative interest rates, which causes the Japanese yen to be weak, as the US rate and Japan rate are far apart.

A weak yen favors Japanese exporters and foreign tourists but doesn't favor Japanese importers or the Japanese domestic economy.

There are always going to be more foreign tourists that come to Japan than Japanese tourists who travel overseas, which of course the size of the total population compared to the size of the Japanese population.

But the weak Japan yen. which decreases the purchasing power of Japanese tourists traveling abroad might be an incentive not to travel at this time.

When I did to Japan, in Jan. 2024 this year, there were a lot of foreign tourists at Tokyo Haneda International airport, which is near the center of Tokyo, as there were many who had arrived from many places around the world.

I remember in 2019, before the pandemic, and during the Japan Rugby World Cup in September and October, its seemed like hordes of foreign tourists at Tokoyo Haneda Airport, with long waits at Japanese immigration.

Primary income, and returns of overseas investments has seen some positives as the higher interest rates, related to the central banks increasing the rates to lower inflation has benefited Japanese overseas investors.

But the same positives might not last in the US as the US Federal Reserve, the US central bank is going to reduce the key interest rate in several times in 2024, as the US economy isd much stronger now.

Have a nice day and be safe!