Japan Trade Deficit Shrinks: Updated Nov. 22, 2024.

Japan's trade deficit shrinks 34% in Oct. on chip equipment exports

Article Source: https://mainichi.jp/english/articles/20241120/p2g/00m/0bu/012000c

Ideas:

Japan is considered the 5th largest goods exporter after the China, the US, Germany, and the Netherlands according to one source, which means exporting and the trade is very important of the Japanese economy.

These days, maybe most advanced economies, and many economies are service and technology based, but goods exporting is still very important for most economies.

Chipmaking equipment has become important in Japan once again, as for a while it lost market share in the chipmaking category, and pharmaceutical products are gaining more importance every year as many advanced economies have become much older age wise and more people need the healthcare products which are produced globally.

Chipmaking equipment has become a global industry with now Taiwan, China, the US, South Korea, and Japan all vying for market share.

Exports increased 9.43 trillion yen while imports increased 9.89 trillion yen, which means Japan still has a slight trade deficit, which actually takes money out of the Japanese current account, while a trade surplus, put money into the current account.

To be more specific exports put money into the current account while imports take money out of the current account kind of like a country's bank account.

Its possible, because of the weak Japan yen, that the value of imports to Japan was slightly inflated meaning the prices might have been higher than normal because of the weak yen and of course because of inflation.

At the same time, exports too could have been inflated as the weak Japanese yen, actually increases the prices of Japanese products sold overseas, the weak Japanese yen is both a positive and a negative for the Japanese economy.

The Japanese trade deficit means the Japanese current account has less money in it, like a country's bank account, which means the Japanese economy and Japanese government has less money to use on for example reducing large debt to GDP ratio which is the highest among advanced economies, and or other programs such as the suggested handout or subsidy for lower income families in Japan.

The reason the Japanese yen is weak now is because of the variance between the US Federal Reserve key interest rate, which is around 5.0 points, while the Bank of Japan's key rate is almost at 0 or maybe 0.25 points which is a big difference between the two countries, which could be the main reason for the weak Japanese yen and the strong US dollar.

As long as the Japanese yen is weak compared to the US dollar Japan might continue to run a trade deficit, unless Japanese exports can improve with more demand from US consumers.

At the same time, japan needs some kind of Free Trade Agreement with the US as Japan imports much of what it needs from the US, and a trade agreement could potentially reduce the price of imports entering Japan maybe could reduce the affect of the weak yen some on imports too.

Japan is a resource-poor country, which means it has to import much of what it needs, and if the Japanese yen is weak and then add in inflation that makes imports for the Japanese domestic economy even mor expensive. 

Again, what Japan needs is some kind of Free Trade Agreement with the US to lesson the cost of imports to Japan.

And yes, the weak Japanese yen is a positive for Japanese investors in overseas markets as the weak Japanese yen increases the value of the investments when they are sent back to Japan. And the same with Japanese exports, as the weak yen against the US dollar increase the value, the price of Japanese products overseas and when brought back to Japan it increases the Japanese current account.

China seems to be going through some kind of transition since the pandemic and who knows exactly when it going to get better or when it can get back to some kind of normal or at least a new-normal for the Chinese economy.

The Chinese government's stimulus policies are needed but are they sustainable for the long term and can they jump start the Chinese economy back to strong growth.

Some have suggested China is headed for a Japanese style stagnation or at least China is not going to see the record growth it has seen for many decades.

Japan's trade surplus with the US will most likely continue, as Japan exports a lot to Japan as the demand for Japanese products in the US is still very strong, but also demand can go ups and downs so there will be periods of strong demand and periods of less strong demand from US consumers.

Japan continues to export, mainly Japanese cars, to countries in Asia, including China, but trade with China has lessoned recently due to less demand from Chinese consumers and companies.

The EU is a big mess at the present time and it seems many of the EU countries are experiencing less than good economic growth and including Great Britain, which of course left the EU some time ago., but who know when exactly when the EU will get back to some kind of strong economic growth including strong demand for Japanese products.

Have a nice day!