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China's COVID-19 policy, yuan's rise vs yen may beset Japan's economy

35 Comments
By Tomoyuki Tachikawa

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@ Socrateos: With respect, don't forget that most important gauge of trade balance/imbalance, Current Account. Along with Current Account's measure against GDP. Current account includes income from investments and transfers (money from investments flowing into the country), and payments to foreign investors who had invested in their funds (money flowing out). As well as net transfer payments, such as foreign aid). Such income is just as much a tangible economic transaction as is cars, phones, soybeans or oil; only it happening largely in the financial markets.

Japan's current account balance is a deficit that increased to 1,188.7 billion JPY in January 2022, up from JPY 506.3 billion JPY YOY and compared with market consensus of a gap of 880.2 billion JPY . This is the largest deficit since 2014. Current Account in Japan is projected to be 1750.00 Billion JPY, but that figure is volatile due to bad global economic news.

Last figures available show current account surplus in Japan 3.20% of GDP in 2020, from 3.60 % in 2019; and projected to trend around 3.50% of GDP in 2022, and 3.00% of GDP in 2023.

I'll leave it to others to show how this metric compares Japan with others.

-1 ( +1 / -2 )

The only issue Japan need to consider about is inflation, not exchange rate.

Exchange rates are relevant only to particular segments of national economy, namely, trade. It is irrelevant to the national economy as a whole for a developed nation like Japan, where trade is mutual - they do both importing and exporting. When you do both, trade cancels out any positive or negative aspect of exchange rate. Cheaper yen is bad for import but good for export, and higher yen is bad for export but good for import.

Inflation, on the other hand, is crucial because it affects what you can buy at home in everyday life. Luckily Japan's inflation rate is low at this moment, comparing to other developed nations.

Inflation Rates:

Japan: 0.9%

UK: 6.2%

Germany: 7.3%

USA: 7.9%

Spain: 9.8%

Argentina: 52.3%

While people in many other nations are losing buying power of their currencies everyday, people in Japan is enjoying stability of their currency.

Japan is a better place to be in today.

2 ( +2 / -0 )

"Japan will sink into the sea!" "Japan will rule the world!" "Japan will sink into the sea!" Yes, wild predictions are so very much fun...My guess--and I've been here a very long time--is that Japan will simply continue to muddle along. Yes, Japan is up against brutal dictatorships across the sea, and one of them has grown mighty indeed since 毛沢東 was murdering his compatriots. And, yes, the kids with their smartphones don't want to have kids themselves...And again, yes, the Japanese are a first-rate people with third-rate politicians...But if it's Kishida vs. Biden, Koike vs. Pelosi...? I'm grateful that I'm here! The yen will survive...

-1 ( +0 / -1 )

@Jax

The Japanese government and the BOJ have no other choice than to continue a devaluation of the yen.

Japan has always seen exports as a way to gain wealth.

Historically, the yen has been much weaker but the people had growing prosperity and those with assets and control benefitted greatly.

A devalued yen allows Japan to literally survive-history is repeating.

-2 ( +1 / -3 )

China may be showing state planned capitalism can produce slightly better results that the "free market" liberal variety that is only enriching a very few.

Shh...can't admit any uncomfortable truths here...western capitalism rules over all.

-1 ( +1 / -2 )

If Ukrainians are reading this, the 100 Kishida bought over will want to go back west

-2 ( +0 / -2 )

nothing will remain in Japan except its debts

-3 ( +3 / -6 )

The one constant about exchange rates is that they’re variable.

4 ( +4 / -0 )

kurisupisuToday  07:43 am JST

The yen is set to decline massively...

I hope so, But guaranteed it will rebound afterwards.

3 ( +3 / -0 )

The BOJ is continuing its ultra-easy policy to achieve 2% inflation. Japan's current inflation rate is 0.9% and extraordinary level in the world, but there are projections that it will reach 2% this summer. There is a possibility of a policy shift around that time.

0 ( +1 / -1 )

Japan's imports to China, however, gained 16.4 percent from a year earlier to 20.4 trillion yen ($166.6 billion) in 2021, while its exports to the nation rose 19.2 percent to 18.0 trillion yen, posting a trade deficit of more than 2 trillion yen.

Japan's imports to China, ........ from China surely.

1 ( +2 / -1 )

China may be showing state planned capitalism can produce slightly better results that the "free market" liberal variety that is only enriching a very few.

When your horizon doesn't stop at the next election, you can always plan better. Same thing in Singapore. The best ran countries are not "democracies", whatever that term means these days.

0 ( +3 / -3 )

Pretty simple : as long as commodities, oil, gold, silver and other precious metals are sold / valued at the USD…. There’ll be no significant changes. And every time the US govt says okay let’s set prices on any other currency … every country runs away . Japan is the only industrialized country that doesn’t include their insanely overpriced food and oil in their GDP. It would show just how high inflation has been for decades . And the Yen much like the USD are the safest bets long term . The Japanese National debt is owned by the the Japanese people . Zero chance of default . Wages won’t go up until a gross profit tax is imposed which won’t be anytime soon if ever .

4 ( +5 / -1 )

I read this article thoroughly, however instead of complaining about situation and writing long pamphlets about what cause it I prefer to focus on how to preserve my earned ¥

Sell your YEN, buy some foreign currency Yuan and USD.

Get yourself gold, silver, land as kurisupisu wrote before.

Consider buying some bitcoin and other cryptos.

We don't know what will happen so diversify as much as possible. Even if you use just one broker make it two or three(in different countries) as part of your assets might be nationalised due to the collapse/bankruptcy of Japan.

Personally I expected default/bankruptcy of Japan and the government will try to pay off all debts by confiscating part of people assets.

Think wisely about your hard earn money.

-5 ( +5 / -10 )

Japan's core problem is wages:

Symptom, not a cause. Wages don’t rise in other places by courtesy of central planners’ meddling.

https://asia.nikkei.com/Economy/Minimum-wage-hikes-sweep-China-in-common-prosperity-push

China may be showing state planned capitalism can produce slightly better results that the "free market" liberal variety that is only enriching a very few.

5 ( +6 / -1 )

@JeffLee

“We need the govt to punish private-sector employers guilty of the price-suppression policies”

It’s not the employers’ fault. Corporations have not been able to raise wages because they have had to divert most of their profits to pay dividends to shareholders.

3 ( +4 / -1 )

The yuan spiked 6.4 percent from the beginning of this year to 19.26 yen as of Thursday, while the dollar soared 6.0 percent to 122.41 yen during the same period

Um, this is a yen plunge, not a yuan spike and a dollar soar. Sheez.

Japan's core problem is wages:

Symptom, not a cause. Wages don’t rise in other places by courtesy of central planners’ meddling.

The yen is set to decline massively...

It hasn’t looked good for some time, but it’s never too late to move in a sensible direction. It’s not like no one in Japan has a clue. They just aren’t the ones in government right now.

2 ( +6 / -4 )

For at least 10 years I have been telling this to Japanese friends who want to "preserve Japan" as it is. Eventually, Japan will become a dirt cheap destination for foreigners, most big companies will be owned by Chinese and other foreigners, and many businesses and nightclubs will be angling for foreign business. Anyone who wants to make money will need to speak English and Chinese - as Japanese will become the local language for poor people.

Definitely, this is the classic type of Japanese mentality that has been for thousands of years. Instead of owning up to their mistakes, Japanese natives punish, harass, and discriminate against foreigners, Koreans, and Chinese for their economic failures. Now, the next target is the rising Vietnamese presence in Japan.

Many Japanese enterprises and assets have been carved up by Chinese, Westerners, Koreans, Vietnamese, and Taiwanese for years now. Japanese people prefer living in a fantasy land rather than overthrowing the corrupt LDP regime that sells the country for cheap!

Yahoo Japan articles and comments in recent years have been reflecting my sentiment in much more pessimistic views.

-7 ( +4 / -11 )

One thing hasn't changed in a long time.

There's always an excuse for incompetence.

7 ( +9 / -2 )

Japan's core problem is wages: they've been lagging corporations' profit growth by wide margins.

This.

This is a great article to read about a country that in many ways is so similar to Japan, but they actually try to solve the real issues:

https://www.eastasiaforum.org/2022/04/01/south-korea-surpasses-japan-in-real-gdp-per-capita/

And not to spoil it, but it doesn't involve letting foreigners run the country.

-3 ( +10 / -13 )

For at least 10 years I have been telling this to Japanese friends who want to "preserve Japan" as it is. Eventually, Japan will become a dirt cheap destination for foreigners, most big companies will be owned by Chinese and other foreigners, and many businesses and nightclubs will be angling for foreign business. Anyone who wants to make money will need to speak English and Chinese - as Japanese will become the local language for poor people.

The last couple of years shows that you are completely wrong. Japan/Tokyo has never been more pleasant without foreigners ruining it. Luckily half the businesses in Roppongi have closed down -- the rest will be torn down for a new development.

-7 ( +4 / -11 )

With energy and commodity prices increasing globally in the wake of the full-fledged attack on Ukraine by Russia, a major oil and gas producer and exporter, resource-poor Japan might experience "bad inflation" -- a combination of an economic downturn and higher costs.

Another name for that old fashioned "stagflation".

Of course workers in Japan, and around the world have been suffering from this for decades and it had nothing to do with China, the pandemic nor Ukraine.

Wages have been stagnant, depreciating for decades as every new crisis requires companies and their shareholders to get bailed out by the public treasury. While the public is allowed to sink further and enjoy uninhibited free market capitalism.

4 ( +7 / -3 )

And trace minerals and elements for digital manufacturing are the most valuable investments.

Not gold , yuan or rupee.

-6 ( +3 / -9 )

The yen is set to decline massively...

For the past 20 years jpy was going up and down from low 90 to 130 to the dollar.

30 years ago it was over 250.

Decline in what sense?

4 ( +10 / -6 )

The end of the us DOLLARS.

-16 ( +3 / -19 )

China will just raise the prices for thier products to be exported and charge higher costs to companies manufacturing in China.

China isn't dumb.

Japan on the other hand isn't making wise decisions domestically or internationally.

How much longer will Japan remain to be a peaceful and safe country to live in is questionable.

Enjoy the ancient culture of Japan while you still can.

-10 ( +6 / -16 )

Cut diplomatic ties with China. Japan needs to stop being naive with a bloodthirsty dictatorship that wants to steal Japanese territory and everything else.

Through history, we can realize that they haven't changed a thing in the last 2000 years.

-3 ( +5 / -8 )

To

preempt the above question by answering.

I suggest that anyone wishing to preserve wealth would hold the yuan and the Indian rupee.

Gold, silver, land, house or apartment, in or outside Japan.

The yen is and has been mismanaged;the people pushed into poverty.

The yen is set to decline massively...

-1 ( +11 / -12 )

I don’t believe it. Markups on Chinese goods are so astronomical the effect would be minimal.

That 8,000 yen jacket cost about 500 yen landed.

8 ( +8 / -0 )

For at least 10 years I have been telling this ...

Yeah? And so far what exactly has realized from your predictions?

And more importantly do you have any suggestions?

-4 ( +7 / -11 )

resource-poor Japan might experience "bad inflation" -- a combination of an economic downturn and higher costs.

This is a false statement.

To correct it, change the word "might" to "has already and will continue to".

3 ( +13 / -10 )

if they got rid of the government and its destructive economic policies 

Japan's core problem is wages: they've been lagging corporations' profit growth by wide margins. "Rich companies, poor workers." That's far more the fault of the corporations, not the govt. We need the govt to punish private-sector employers guilty of the wage-suppression policies that drag down economic growth, given that 60% of GdP comes from consumption.

13 ( +17 / -4 )

For at least 10 years I have been telling this to Japanese friends who want to "preserve Japan" as it is. Eventually, Japan will become a dirt cheap destination for foreigners, most big companies will be owned by Chinese and other foreigners, and many businesses and nightclubs will be angling for foreign business. Anyone who wants to make money will need to speak English and Chinese - as Japanese will become the local language for poor people.

The irony is that, if they got rid of the government and its destructive economic policies (corruption, big-business collusion, excess taxes, over-regulation) and opened up to foreign investment and controlled immigration earlier, it could have been a different story. Instead, the people that were so against opening up to the world will become the servant class of the world and have little say even in their own country.

There is still time to correct course, as the coming economic crisis will hit every country. But it would require a radical change - and radical change usually comes with its own problems.

4 ( +23 / -19 )

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