Japan logs record 30 tril. yen current account surplus in FY 2024
Ideas
Japan's economy is 4th or 5th largest in the world now, and its current account is very important for Japan to ensure that it can keep its economy afloat and not go into bankruptcy as it has the highest GDP to debt ratio in the world.
Because its domestic economy is not that strong, Japan has to depend on foreign investments, foreign tourists to spend money in Japan, and on exports such as Japanese cars to the US.
It's seems Japan a long time ago, decided that exports and foreign investment were what was needed to keep the Japanese economy going.
It must be remembered that the weak Japanese yen has played a big part in increasing the current account as a weak Japanese yen increases the profits of Japanese export companies along with increasing foreign investments, and increasing the purchasing power of foreign tourists in Japan, which means they spend more in Japan.
International trade has become a major economic driver for the Japanese economy, as without international trade, the Japanese economy might not grow that much, as seen in recent years.
The Japanese economy seems to be relying a lot on the weak Japanese yen, to boost its economy but it might not be that way always, as Japan needs to improve and grow its domestic economy too in case international trade begins to decrease.
For example if the Japan delegation conducting negotiations with the US delegation related to the tariff situation, doesn't turn out in Japan's favor, demand for Japanese products such as Japanese cars could decrease in the US, as US consumer demand will decrease with the high tariffs being added to the costs of Japanese cars in the US.
Yes, it must be remembered that the weak Japanese yen, increases the value of products not necessarily the volume of products, which in itself is good but its important to know that demand for Japanese products is also important and again not just the weak Japanese yen.
The Bank of Japan, which manages the Japanese economy knows that what is happening is a balancing act, meaning it has to look at the weak Japanese domestic economy and the stronger export economy and try to find a balance between the two sides of the same coin.
Again, there is the volume affect and there is the value affect and because of the weak Japanese yen, the value for imports into Japan has been increasing as the weak Japanese yen increases the value of imports into Japan.
The volume of imports might not have decreased that much but the value of imports might have increased a lot in recent months and years.
Assuming the stats being given are values and not volume the value of imports grew 110.29 trillion yen, while the value of exports grew 106.24 trillion yen, which means a deficit of 4 trillion yen.
That might not seem like much but it could be significant for the Japanese economy and the growth of the economy.
Japan has a way to go to improve its travel balance but is making significant progress with 38.85 million foreign tourists visiting Japan in 2024.
The weak Japanese yen, gives foreign tourists more purchasing power, which means they can spend more in Japan compared to if the Japanese yen was a strong currency. Foreign tourists spending a lot of money in Japan might be one of the only bright spots at the moment for the Japanese economy.
Again, foreign tourists spending in the Japanese economy, at the present time, might be the only real bright spot for the Japanese economy, as Japanese domestic residents are challenged due to continued inflation which limits their disposable income, which means they spend less in the economy.
Most likely, the Japanese holiday period called Golden Week, usually the first week of May might have seen less travel and less spending the normal years about Japanese households might have cut back on travel and spending during the Golden Week period.
Have a nice day!
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