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!

Japan Current Account: Updated Jan. 18, 2024

 

Japan's April-Sept. current surplus triples to record 12.7 tril. yen

Article Source: https://mainichi.jp/english/articles/20231109/p2g/00m/0bu/024000c

Article:

TOKYO (Kyodo) -- Japan's current account surplus in the first half of fiscal 2023 tripled from a year earlier to a record 12.71 trillion yen ($84 billion), lifted by record-high foreign investment returns as falling energy import costs trimmed the trade deficit, government data showed Thursday.

Primary income stood at 18.38 trillion yen, up 3.9 percent from a year earlier, as higher overseas yields and a weaker yen boosted the total. The figure was the highest since comparable data became available in fiscal 1985.

As energy prices dropped, the trade deficit for resource-poor Japan shrank 84.7 percent to 1.41 trillion yen, with overall imports down 13.2 percent at 51.03 trillion yen.

Ideas:

It must be remembered that in 2022, Japan still was in the midst of the pandemic albeit the end of the pandemic, so the economic situation might not have been the best in 2022.

High energy import prices has taken it toll on the Japanese current account as it take money out of the account compared to exports which but money into the current account.

The fact that there were record foreign investment returns shows that Japanese investors feel the global economy is in good shape and continue to invest in global areas.

The weak yen does have some positives even though it might not be good overall for the Japanese domestic economy.

Article;

Exports were flat at 49.62 trillion yen, according to the preliminary data. Auto shipments, particularly to the United States, remained robust as the impact of parts shortages continued to ease.

The current account balance is one of the widest gauges of international trade. Japan's fiscal-half surplus fell sharply last year, as crude oil and other energy imports surged amid Russia's war in Ukraine and the global recovery from the COVID-19 pandemic.

The services deficit fell 29 percent to 2.33 trillion yen, but the travel surplus saw a roughly 15-fold increase to 1.65 trillion yen, a record on a six-month basis, as the number of foreign visitors to Japan jumped.

Ideas:

Japanese auto exports are a major driver of the Japanese economy, An economic driver is anything that significantly increases economic growth and in this case Japanese auto exports are a significant economic growth engine.

Unfortunately, Japan is a resource-poor country and has to import much of what it needs such as crude oil and energy. At the same time, Japan is at the mercy of global markets and also a weak yen, which increase prices on energy products and other products too.

The services sector and the service deficit is a little challenging to understand as to how Japan defines a services deficit. For example besides transportation and or travel, what else is included in services.

It easy to see the travel surplus as more foreign visitors entered Japan than Japanese leaving Japan. In new article, that just came out, 25 million foreign visitors entered Japan through December of 2023. Not exactly a record compared to 30 million in 2019, but 2024 for sure will probably exceed 2019, as long as the Japanese yen remains weak.

Article:

A travel surplus means the amount of money spent by foreign visitors in Japan exceeds that spent by Japanese abroad.

A weaker yen gives foreign travelers more purchasing power. For Japan, it boosts the overseas profits of exporters but deals a blow to importers.

Compared with a year earlier, the yen was 5.2 percent weaker against the U.S. dollar and was down 10.5 percent against the euro as the Bank of Japan maintained ultralow rates at a time when its U.S. and European peers were hiking interest rates.

Ideas:

The challenge in 2024, for Japan and the Bank of Japan, is what does the Bank of Japan want and what does the Japanese government want. For example, the weak yen significantly increase foreign visitors to Japan, but at the same time, might not be good for the domestic Japanese economy.

So the Bank of Japan has to decide if and when to increase the key rate, which might affect the strength of the Japanese yen, which could mean foreign visitors might not have as much purchasing power in Japan as they do now. 

A weak yen is good for Japanese exporters too, as it increases profits of exports, So the Bank of Japan has to look at that too in relation to increasing the key rate in the future.

Perhaps, if possible, there might be a compromised Japanese yen that doesn't affect the purchasing power of foreign visitors, its still good for Japanese exports, and helps importer too with a little stronger Japanese yen.

Article:

In September alone, the current account surplus more than tripled to 2.72 trillion yen, as the goods trade balance returned to the black.

The surplus came to 341.2 billion yen after imports dropped 18.1 percent to 8.72 trillion yen, while exports grew 2.6 percent to 9.06 trillion yen.

Primary income shrank 1.1 percent to 3.08 trillion yen.

Ideas:

The Japanese current account is like a country's bank account, as exports bring money into the current account, as does foreign visitors who spend money in Japan, while imports take money out of the Japanese current as they buy things from overseas and have to pay for them. 

The challenge has been the weak Japanese yen, which increases the price of imports, and the price of products in the domestic Japanese economy.

So the again, in 2024, the Bank of Japan has to decide what is best for the Japanese economy. A weak yen, as it is, or a little stronger Japanese yen , that might balance the major factors, such as foreign visitors, exports, imports and the Japanese economy.

Its not going to be easy to try and figure out to balance out the major factors that are in play in the Japanese economy. 

Have a nice day and be safe!