Japan logs record August trade deficit on weak yen, costly oil

I thought the inflation was just a temp thing that would be brought under control. But it doesn't seem to end. Starting to get scary

External Factors are hampering the struggles, if anything were put on a serious note.

2021 - devastated by Covid and Supply chain issue

2022 - weak yen and oil price

Cant live by hoping for good old days....

those tourist dollars would have come in handy right about now! Guess they are reaping what they have sown....

Nuclear power will solve this problem.

Yes nukes would help. and a sensible central bank policy to stop the yen from cratering.

Is it even surprising? A lot of things have stopped moving because tourists could not get in!

Weak yen is only a small part of a larger problem. It is not a consequence of corona pandemic and oil price. The Japanese economy is weak. Period!

The lack of young workforce and the insane amount of elderly, plus the well-known Japanese reluctance in accepting immigrants, will bury the Japanese economy more and more.

Moreover, Japan is no more a leader in high-tech production. Just see smartphones. Apple and Samsung of course, but also the various Chinese brands such as Xiaomi, Huawei, Oppo, lead the market in the west and in Asia. Similarly concerning PC.

Japan's future is gloomy. Considering the current trend, it will become a nursing home island full of old persons where the main active businesses will be nursing care and medical assistance for the elderly.

A heavy price has to be pay when you following America's flawed diplomacy of Ukraine and eastern Europe blindly. Russia is god status of energy supplier!

I thought the inflation was just a temp thing

Japan’s inflation starting heating up from February, after the Russian invasion. That’s six months. So, yeah, it is temporary so far. I was a kid in the 70s, when strong inflation lasted throughout that decade.

A lot of things have stopped moving 

Japan’s exports were up 22%. Manufacturers and others are moving pretty quickly.

Fresh Prince of Japan

agree with you 100%

Inflation is only just getting going in Japan (and US and UK and EU and......)

I recently read the chapter in Milton and Rose Friedman’s book “Free To Choose” about the cure for inflation.

It’s interesting, because 42 years ago approximately when the Friedmans wrote that book, they held up the case of how Japan dealt with its inflation in the 1970’s as a case study of how bringing it under control could be done.

So far, today’s Japanese central planners have it completely different to back then, so buckle in.

So, yeah, it is temporary so far

CPI is only getting started, if one considers the PPI number out the other day. 9% was it?

Companies won’t be able to bear those higher costs without some kind of consequences further down the line, higher CPI probably, companies going under… more government subsidies and debt…. a combination of these shall be seen, I imagine.

Inflation is only just getting going in Japan (and US and UK and EU and......)

US CPI 9.1% in August, 8.5% in July, 8.1% in August. Gasoline $5/gallon after Putin's invasion of Ukraine. Now $3.70.

Well, if you say so...

Japan is the 3 country that hold the most dollars , solution of the problem exchange a lot of dollars into yen , the same that china did not so long ago.

Give the Yens to the Japanese to compensate for the increated power bill and because of this exchange the yen will be strong again , without any tax rate change.!

O.K the US will cry a little ,,

US CPI 9.1% in August, 8.5% in July, 8.1% in August.

9.1 to 8.1 still has inflation high at 8.1%…. And prices don’t revert back to where they were when inflation rate does come down. They only stop going higher.

Inflation rate peaking is a nonsense. Until the rate is back at a desirably low rate, central banks are going to have to keep interest rates high. It’s going to take a goodly amount of time to get it back under control again.

Fresh prince of Japan i echo that hit the nail on the head 100 percent

Hope Japan got a discount for their serial (and apparently limitless) sanctions evasion practices....

"Japan, imported over 200% more natural gas from Russia in August compared to the previous year, the Kommersant business daily reported Thursday, citing data from Japan’s finance ministry.

Japan shipped 450,000 metric tons of LNG from Russia last month — a 211.2% increase from August 2021."

The lazy Japanese government has and is digging a massive hole for the people of Japan

fxgai:

I recently read the chapter in Milton and Rose Friedman’s book “Free To Choose” about the cure for inflation.

It’s interesting, because 42 years ago approximately when the Friedmans wrote that book, they held up the case of how Japan dealt with its inflation in the 1970’s as a case study of how bringing it under control could be done.

So far, today’s Japanese central planners have it completely different to back then, so buckle in.

Actually Japan is still doin well in putting inflatin under control.

Here is a comparison between US (and Japan) for inflation rate this year so far:

Jan　7.5（0.5）

Feb　7.9（0.9）

Mar　8.5（1.2）

Api　8.3（2.5）

May　8.6（2.5）

Jun　9.1（2.4）

Jul　8.5（2.6）

Sanjinosebleed:

those tourist dollars would have come in handy right about now! Guess they are reaping what they have sown....

Eventually turism will come back and it will help Japan, but it has never been very significant elemet of Japanese economy.

What cheap currency helps is Japan's huge foreign assets. Since a trade war between US and Japan in 80's and due to a long trend of domestic population decrease, Japanese companies have moved ther manufacturing works abroad. Japan, for example, makes more cars abroad than domestically. The result is that Japan has been the world largest Net Foreign Assets (NFA) holder in the last 31 years in a row.

Because of the simple fact that

Changes in NFA = Curren Account + Valuation Effects (Exchange Rate),

Japanese assets increase as Japanese yen decrease.

This is in a sharp contrast to the Pre-90's when Japanese economy relied heavly on export, which was also helped by cheaper currency.

Japan logged record capex for August, over 150% higher than forecast.

https://au.investing.com/economic-calendar/capital-spending-32

Socrateos,

On the contrary Japan isn’t trying to control inflation - they are explicitly trying to increase it.

Inflation is a tax.

It is the only tax the Japanese central planners can opt for, because they are too weak to cut spending by 40% and too weak to hike tax revenues by 40%, for political reasons.

Inflation is the tax they can impose without having anyone vote for it.

Japan’s inflation is only getting started I think, and there is no way that the BOJ only, can stably achieve 2% inflation, unlike other global peers. As you note, inflation was left to totally get out of control in the US, and yet Japan is still singing the same tune despite seeing what is going on elsewhere now.

How popular is that inflation with voters overseas?

What cheap currency helps is Japan's huge foreign assets.

The foreign assets are indeed worth more in yen terms.

It is an interesting thing, because foreign asset income tax revenues in yen terms will increase, all else being equal - it will be interesting to see how much that helps tax revenue numbers.

fxgai

On the contrary Japan isn’t trying to control inflation - they are explicitly trying to increase it.

Yes and No. Japan's policy is not united. Bank of Japan has been advocating for "inflation target of 2%", but the powerful Ministry of Finance has been opposing Kuroda's policy by advocating a danger of hyper-inflation. Most of all, Japan's executive office (LDP Prime Ministers) has been reluctant to spend money. In otherwords, BOJ is printing money but money printed are not in use for free spending. Hence no inflation in Japan despite BOJ's policy.

fxgai

The foreign assets are indeed worth more in yen terms.

It is an interesting thing, because foreign asset income tax revenues in yen terms will increase, all else being equal - it will be interesting to see how much that helps tax revenue numbers.

Net profit of all of Japanese companies in the 2022.Q2 was 28.3 trillion yen (17.6% increase from the same period last year), the heighst ever, largely due to weaker yen. A key to understand this phenomena is the fact that Japan is the world's largest foreign asset holder: weaker the yen, higher the profit.

https://www.youtube.com/watch?v=XXoaNdTmZ_Q

Japan's executive office (LDP Prime Ministers) has been reluctant to spend money.

Japan is running massive fiscal deficits for years.

100+ trillion yen of spending on revenues of 60+ trillion yen of tax revenues is not my idea of Scrooge.

We’ll see how inflation develops going forward, but Japan’s got little to show in past performance for those decades of out of control spending. Excessive spending that diverts Japan’s resources away from other more productive uses.