Japan Trade Deficit: Updated Oct. 23, 2024.

Japan trade deficit in fiscal 2024 1st half widens 14.4% on weak yen.

Article Source was deleted by mistake.

Ideas:

Until the yen become stronger most likely Japan is going to have a trade deficit as its a resource poor county, and has to import much of what it needs and as a result the weak Japanese yen will continue to increase import prices.

Japan is strong export focused country but for now the exports are not able to overcome the trade deficit even though there have been record exports.

Export volume might have been larger than import volume, but again the weak yen throws everything out of whack related to international trade and the Japanese current account.

Computers from the US. might not have actually come from the US but a US product made in China such as the Apple Mac Book, which might be manufactured in China, as for computers Apple is the most popular in Japan as is the I phone.

Japan, it seems, has gotten back into the semiconductor equipment and chip making business after losing market share to TSMC in Taiwan and Samsung in South Korea.

And yes semiconductor chips as again become a key export product for the Japanese economy and should continue to see solid growth in the future.

You can never count out the US, as its still the strongest economy in the world at this time and there seems to really not be any other economies that can match the US. There might be some bumps here or there but there should not be anything significant in the future.

China is a very different situation as maybe its going through a situation similar to what Japan did after it grew a lot in the 1980'as. China seems to have grown fast, maybe too fast, but maybe it has leveled off and its having some real challenges as this time.

Japan seems to be stuck in some kind of stagnation as it economy just to be very stable but at the same time never really grows that much as it might reach 1 percent or not even that most years.

As the data shows trade with the US is still robust and most likely will continue to be strong despite some who say the US is headed for a slow-down in the future. 

And has shown in the data trade with China is still on-going but of course not at the level that it was before the pandemic.

Japanese companies just need to stay the course and continue to ship to China maybe someday the largest or second largest economy will find it footing again and get back to normal or some kind of new normal for China.

The Asia-Pacific region is a large area with a  huge population so trade with countries in the Pacific area should continue to be strong as the data suggests.

However something is going on with the European Union and maybe its not just the Ukraine war as trade with the EU just isn't what it used to be.

The growth of imports of course can be attributed to the weak Japanese yen, as maybe the volume was not that much as maybe in line with the export volume from the EU.

The Bank of Japan has to decide what is best for the Japanese economy. Is it the domestic economy or is it the export focused part of the Japanese economy. The Bank of Japan seems to not be able to balance out the concerns of both groups at this time.

But to be fair, its seems the BOJ is unable, yet trying to rein in the weak Japanese yen. But again, to be fair, the BOJ doesn't want to be seen by the US as a currency manipulator, so whatever it does its keep behind closed doors and it never really talked about.

So importers feel the weak yen, and so do retail customers in Japan, while export companies feel the weak Japanese yen too but with increase profits from overseas.

The Japanese yen seems to be on a roller coaster ride, as of late, which makes companies both import companies and exports companies very uncomfortable as they sometimes don't know how to plan or manage the Japanese yen situation.

Its especially hard of small and mid-size companies who don't have the resources needed to protect themselves from the weak yen or even the volatility of the Japanese yen.

And again to be fair, the Bank of Japan doesn't want to intervene in the Japanese economy too much as too much intervention might upset the normal market mechanisms. Sometimes too much intervention is worse than no intervention.

Have a nice day!

Honda Car Company: Updated Jan. 21, 2024.

 

Honda reports its 3Q profit jumped on strong demand at home and in the US

Article Source: https://mainichi.jp/english/articles/20231109/p2g/00m/0bu/059000c

Ideas:

Like Nissan, and the article before, Honda seemed to have a very good July-September 3rd quarter with a 34% increase earnings.

Of course the weak Japanese yen, boosted earnings as a weak yen increase profits for Japanese exporters.

It took a long time, maybe two years for the shortage of computer chips to finally get back to normal.

In a 2020 BBC article, with a German car CEO saying it could take two or more years for the chip shortage to finally be resolved. 

Even though the chip shortage and pandemic delays are finally being taken care of, for the most part, maybe they never should have happened. Yes, the pandemic was a once in a lifetime situation, that maybe was unexpected and maybe the delays related to the pandemic couldn't be helped, but companies should always have supply chain backups in case their main suppliers are having challenges with anything.

Slowing economic growth, sometimes, is just the business cycle situation, where there periods of good growth and periods or not so good growth.

China has maybe taken the global lead in EV cars and maybe, unfortunately, Honda and Nissan are now later comers, followers, in the EV market and might not be able to gain or regain market share in China and or maybe even the US.

But next year, if Honda begins offering BEVs it might be too late if China is selling them at this time,

South Korea car makers Hyundai and Kia have been making EV cars and hybrid cars for sometime, and they are now a large part of the market in South Korea.

Its quite possible, even though Toyota, Nissan, and Honda might be a little behind in EV production and sales, their brand loyalty among customers, globally, might help them catch up and even maintain market share in total car sales.

It must be remembered that Honda, and other Japanese car makers, and especially the smaller car makers in Japan, make more than just conventional cars such as motorcycles, trucks, subcompacts, and so on.

The challenge seems to be making sure there are enough charging stations in plenty of places for EV cars, and to make sure EV cars are not too expensive for the average Japanese household.

While the weak yen is of course very good for Japanese exporters, Japanese exporters need to be aware in fiscal 2024 as to what the Bank of Japan might do with its ultralow policy and will the BOJ increase the rate which means the yen might not be so weak.

The weak yen, mostly, is good for many in Japan and globally, but its not good for the domestic economy and import prices and inflation continues to cause higher than normal prices in the Japanese economy.

The Bank of Japan has to weigh what is best for the Japanese economy. For example, the weak yen, is an incentive for foreign tourist going to Japan. So the Japanese government and the Bank of Japan have to decide how much economic growth do foreign tourists help with growth. 

For example in 2023 25 million foreign tourists entered Japan, and that might have been a lot of spending on Japanese products, restaurants, hotels and so on. 

Does the Bank of Japan want to jeopardize losing a certain amount of foreign tourists and how much would they be willing to lose with the strengthening of the Japanese yen.

Sales, globally, for Honda seem to be solid expect for many Europe and Asian. But that is normal, as any company might not have solid sales in each region, so its good for companies such as Honda to be in as many markets as possible in case one region, such as the EU might be down for a while, while another region such as the US might be up.

And its important, again, to remember that Honda, like many Japanese car makers, and especially among the smaller Japanese car makers that they make more than just conventional cars. 

For example maybe in Indonesia and India, Mitsubishi makes subcompact cars for those markets that might not be sold in Japan.

Most likely shares of Toyota, Nissan, and Honda all increased because of record earnings.

Have a nice day and be safe!

Japanese Companies: Updated Jan. 19, 2023.

 

Major Japan firms to log record 1st-half profits on weak yen

Article Source: https://mainichi.jp/english/articles/20231109/p2g/00m/0bu/072000c

Article:

TOKYO (Kyodo) -- Major Japanese companies are expected to log a record combined net profit for the fiscal first half driven by carmakers on the back of a weak yen, with a post-COVID recovery in activity also providing tailwinds for services and other sectors, according to a tally by a securities house.

The aggregate net profit of 819 firms that released earnings for the six months ended September by Wednesday increased 12.2 percent to 17.87 trillion yen ($118 billion) from the same period last year, according to data from SMBC Nikko Securities Inc.

The projected profit for the current fiscal year through March 2024 is also on course to hit a record high, providing a strong argument for businesses to raise wages during next year's "shunto" spring negotiations between management and labor unions.

Ideas:
This might be another good reason for the Bank of Japan to keep the yen somewhat weak and it helps companies and the overall economy.

Of course it might not help the domestic economy overall, but for the most part, the weak yen seems to have helped companies and exporters.

Whether how record net profits are going to help services and other sectors is another story, as maybe most services type companies might be linked to the domestic economy and not to foreign economies.

But the weak yen does help with the record number of foreign tourists who have traveled to Japan and spend a lot because their purchasing power have increased.

As far as companies and increasing wage in April 2024, it remains to be seen if only large major companies are going to increase wages, again, or are small and midsize companies going to also increase wages.

Article:

But the figure, representing only around 57 percent of the companies that will make up the final tally, may be pulled down as major firms release earnings for the first half. SoftBank Group Corp. said Thursday it posted a net loss of 1.41 trillion yen for the period.

Combined net profit for manufacturers rose 11.8 percent to 9.13 trillion yen, with transportation equipment makers such as automakers seeing their net profits soar 90.7 percent to 3.56 trillion as the easing of a global chip supply crunch boosted production.

Food producers also posted an 81.8 percent increase in net profit to 237.7 billion yen as they passed on higher raw material costs to consumers.

Ideas:

A market economy is very complex with many sectors and many more companies in each sector. As such there are always some who improve their profits and some, like ,SoftBank, will have some not so good quarters or years for whatever reason.

It must be remember, that last year and 2022, the Japanese economy, for the most part, was still in a pandemic mindset and also automakers were having supply chain challenges which limited production.

For food producers, it seems maybe they might have used the idea if raw material prices are going to increase, or not, lets increase prices anyway. An 81.8 percent increase in net profit seems too much when the Japanese economy is dealing with increased inflation, and consumers are paying for it while companies rake in huge profits.

If companies passed-on their raw material costs to the next in the supply chain, you might think that whomever, including the final customer might not like the increased costs and not buy as much, but in this case, food producers actually has record net profits.

Article:

Excluding financial firms, net profit among nonmanufacturers grew 11.8 percent to 8.26 trillion yen.

The land and air transportation industries saw notable increases thanks to recovering travel demand and inbound tourism amid the easing of the coronavirus pandemic, with the latter surging almost nine-fold.

Power and gas companies returned to the black as rate increases helped support their bottom lines.

Ideas:

Nonmanufacturers, might be a large group such as the services sector, and if the services sector grew 11.8 percent that is good for the Japanese economy, as maybe, for quarter 4 and or fiscal 2023, Japan's GPD might finally get past the 1 percent growth rate that its been stuck at for a long time.

It seems airlines are trying to make up lost earnings from the pandemic and airline ticket prices are high at this time. But it hasn't stopped people from traveling, and especially to Japan as many foreign tourists are taking advantage of the weak yen. 

Power and gas companies might have seen increases in profits, with rate increases, but what about the average household in Japan and how much have they had to pay related to the rate increases. 

The Japanese government has been providing subsidies related to rate hikes, to companies, but have the subsidies reduced the average household energy cost.

Article:

Meanwhile, shipping firms saw their profits sag 81.7 percent amid a slowdown in China's economy, while wholesalers experienced an 18.6 percent decline.

"We can expect further business expansion, particularly among manufacturers, in the coming years, but risks may emerge if the Chinese economy continues to slow or if the yen appreciates significantly," said Hikaru Yasuda, SMBC Nikko's chief equity strategist.

Ideas:

The Chinese economy, as reported recently, grew 5.3 percent in 2023, which is low for China, but its better than nothing, and or course maybe many investors would prefer to see the Chinese economy grow like before.

But might never happen again, as economies move from the developing stage to near the advanced stage their economy growth gets less and less. So maybe 5.3 percent is about right for China despite its the Chinse economy having some major challenges at this time.

Shipping firms, unfortunately, might have put all of their eggs into the Chinese shipping routes instead of diversifying their routes globally.

Also, many oil used by shipping firms might have put a dent in their profits too and oil and gas prices remain high, but not has high as before.

The decline in profits of wholesalers might be from companies passing-on their costs to the next in the supply chain, including the wholesalers, it could be from higher energy costs, it could be from the weak yen, which increases import prices if the wholesaler buys from overseas.

Have a nice day and be safe!