Japan Current Account: Updated January 16, 2025.

 

Japan's current account surplus jumps 54.5% in Nov. as trade rebounds

Article Source:  https://mainichi.jp/english/articles/20250114/p2g/00m/0bu/006000c

Ideas:

Because Japan manufactures a lot of goods related to trade, Japan seems to always be concerned about its current account balance. Usually small geographic countries like Japan and the Northern European countries focus a lot on trade and exporting.

A countries current account is like a country's bank account as exports bring money into the the account while imports take money out of the account.

The current account, if used wisely can help Japan with its debt to GDP ratio which at the moment is the highest among OECD countries. 

Even though there was a record surplus Japan still has to make up for the losses from the previous years, but its a good start to having a real trade surplus in the current account.

As global oil prices continue to decrease that will be a good situation for Japan, as Japan is a resource poor country and has to import much of what it needs and then there is the Japanese yen, which at the moment is weak, which means it increases the price of imports to Japan.

Chip making equipment is now at an all time high and Japan is smart to invest in Japan making along with producing chips themselves but at the moment they are way behind Taiwan and South Korea in producing chips.

Japan has more than just the goods trade to think about for the current account as there is also overseas production plants which make products overseas and then there is Japanese investments related to dividends and interest earnings which help the current account in Japan.

And as the same time there is foreign tourists who go to Japan and spend a lot due to the weak Japanese yen, which puts a lot of money into the Japanese economy with hotels, restaurants, shopping at stores, and then tourist areas too.

An idea that maybe the Bank of Japan has been thinking about it to keep the Japanese yen relatively weak as it bring in record numbers of foreign tourists, which helps significantly the somewhat stagnant Japanese economy.

Its not a surprise that the trade balance was a surplus as the weak Japanese yen helps foreign tourists but hurts Japanese tourists who want to travel overseas especially to the US and the EU as those currencies are strong compared to the Japanese yen.

There has been talk that the city of Kyoto, a major tourist area for foreign tourists, is struggling with over-tourism now and might impost a tourist tax on hotel stays of maybe 10,000 yen per night or $100 dollars per visit as a way to reduce the waste and other littering related to too many tourists in Kyoto.

Of course what Japan doesn't want is to have tourists thinking that Japan is not foreigner friendly as they need the money that foreign tourists spend in Japan to help the Japanese economy.

Have a nice day!