Japan Trade Deficit: Updated June 25, 2024.

 

Japan logs $7.7 billion trade deficit, exports hit record in May

Article Source:  https://mainichi.jp/english/articles/20240619/p2g/00m/0bu/008000c

Ideas:

Japan's current account, lately, seems like a rollercoaster of ups an downs due to the weak Japanese yen.

Exports, for the most part, seem to be robust but so does imports. The problem is the weak Japanese yen makes imports more expensive and their value goes up which causes the Japanese trade deficit.

A trade deficit happens when imports are more than exports. Traditionally Japan has been a trade surplus economy, but lately, because of the weak Japanese yen, it has become a trade deficit economy.

Its not the volume of imports that is causing the problem, its the value of imports related to the weak Japanese yen.

Again its the value of imports that is causing concern, as the export volume most likely is still more than the volume of imports but the weak Japanese yen is causing all of the challenges for the Japanese economy at this time.

An economies current account is like a country's bank account, and imports take money/yen out of the account but exports put money into the account.

Golden Week in Japan is always slow for the Japanese economy as most companies take the week off and of course not much is produced or shipped during that week.

Even a 15 percent decrease in the Japanese yen can be significant for Japanese importers and for other companies as Japanese importers will pass on their costs to the next in the supply chain, including the final customer.

And of course, the Japanese car industry is a significant economic driver for the Japanese economy, meaning it helps significantly with economic growth.

The Japanese economy is still the 4th largest economy in the world, after being passed recently by Germany. But its still a large domestic economy, but for the past 50+ years its been focused on exporting and not so much on the domestic economy.

The US economy seems to be the one bright spot in the world now, despite all of its political challenges.

However, like before the pandemic, when Japanese companies became too dependent on Chinese tourist going to Japan, Japanese companies that export to the US need to be aware that, even though things seem stable in the US, there is always the chance that demand for Japanese products could decrease some.

Its easy to say, and of course Japanese companies are always looking to improve in other markets, but when the good is good, its hard to change things such as when US demand its very good, why change?

The Chinese economy might still be going through a period of transition from an up and coming economy to a quasi-advanced economy. 

But every since the pandemic, it seems the Chinese economy just hasn't been the same, as there are some structural challenges still in the Chinese economy.

As China is still a major trading partner with Japan, Japanese companies are going to stay the course until the Chinese economy finally gets back to some kind of normal.

The Asia market is a very large market and its more than just China and South Korea, as the other countries have significant economies too.

The EU, excluding the United Kingdom, its having its own challenges, and of course the Ukraine war might still be causing some economic challenges in the EU.

But take away the Ukraine situation, and the EU is still not where it should be as its economic growth its barely at 1 percent if even that.

But the main challenge for the Japanese economy is that its a resource-poor country and has to import much of what it needs, which makes it very susceptible to the weak Japanese yen with higher than normal import prices.

Have a nice day and be safe!