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Japan logs Y180.8 billion trade deficit, but exports jump

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Going to be like this from here on in, days of large surpluses are numbered, new paradigm for Japan

3 ( +3 / -0 )

If the yen weakens further as the Abe administration hopes and as many analysts anticipate, then import costs of fossil fuels will keep heading higher, prompting more trade deficits and even greater yen depreciation — a vicious circle.

4 ( +5 / -1 )

The arrows are missing their targets. The shafts are crooked and the fletchings are on backwards.

4 ( +4 / -0 )

The arrows are missing their targets. The shafts are crooked and the fletchings are on backwards.

Time for a new metaphor. How about the three paintballs of recovery? That would allow for a much wider target.

2 ( +2 / -0 )

The arrows are missing their targets. The shafts are crooked and the fletchings are on backwards.

I think maybe they shot off three boomerangs by accident...

1 ( +2 / -1 )

The development of natural resources such as natural gas in the coast of Japan is an urgent need. Japan should proceed with the practical application of methane hydrate found in the Sea of ​​Japan.

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Exports meanwhile climbed 7.4% to 6.06 trillion yen, growing for the fourth straight month as weak demand in Europe picked up and the value of car shipments to the United States rose.

This is a badly written article. The 7.4% growth, although it doesn't say, is in comparison to June 2012.

Basically what it is saying, what others are also saying, is that exports have shrunk in volume, but because of the depreciation of the yen from a year ago, the value of those shrunken exports have increased in their monetary value.

Very worrying news.

-2 ( +2 / -4 )

And Abenomics will rape the middle and lower classes with taxes to make up the deficit while corporations get tax cuts and labor reforms to increase their profits. Fan-bloody-tastic! Have a nice day!

2 ( +3 / -1 )

Abenomics is just seven months old, wait pls :(

0 ( +1 / -1 )

One of two things will happen....Abe will have the imported fuel costs removed from the equation to make the appearance of growth become his reality.

And, the "screams" for the nuclear reactors to be restarted will grow to a crescendo! (Only in the board rooms of executives!)

-1 ( +1 / -2 )

Once those reactors are restarted the reliance on so much importation of fossil fuel will greatly alter the figures, then you can expect to see a surplus.

How about when the yen was at 120 to the $ no one was clanging on with so much hollow sounds.

0 ( +0 / -0 )

Abenomics is just another version of Ben Bernanke QE. This definitely not help Japanese economy for a long term. You can't fix the economy by only taped the wound. But cure them. Any chain reaction could happen during these recession times. It will impact Japan sooner or later.

0 ( +0 / -0 )

Well why not boost the economy first within the global sick economy and then when Japan can see a better balance at the horizon, start working on the necessary changes, preferably together with G7 and G20. The long term perspective is the only way to go but the start could be made a bit easier.

0 ( +0 / -0 )

"This is a badly written article. The 7.4% growth, although it doesn't say, is in comparison to June 2012.

Basically what it is saying, what others are also saying, is that exports have shrunk in volume, but because of the depreciation of the yen from a year ago, the value of those shrunken exports have increased in their monetary value."

You are right in term of basic calculation. After all, if:

I exported an item for 120 yen in last year, it was equivalent to $1.5 ($1 to 78 yen). This year in order to sell for $1.5, my price in yen should be 150 yen ($1 to 99.6 as of today). compared to last year, my gdp should be up 25% in yen term, not a mere 7.4%, right? That mean the export is actually shrunk compared to last year, right?

However, let's talk business.

If i'm a producer in Japan, the first thing i'd think of right now is how to gain market shares for future profitability. While raw material and utilities costs sure have gone up; however, other costs such as human resources and fixed costs remain the same due to no inflation.

Assumes that i produce an item with raw material at 25%, utilities at 25%, human resources at 25%, and other costs at 25%. If last year it cost me 100 yen to produce a product, it was $1.25 in term of USD. ($1 to 78 yen) This year, raw material and utilities shoot up to 25% due to cheaper yen; however those 2 only account for 50% of production costs, so a 25% increase only cost me 12.5% more in real term. That's 12.5 yen extra for production costs. This year, HR and other costs such as advertisements, rental costs, etc remain the same since there is no inflation. Thus, my product costs for this year is only 112.5 yen, which is around $1.125.

Last year i sold that item for $1.5 (120yen). The mark up margin in my field is low due to intense competitions from oversea producers. I got a 25 cents (20 yen) of gross profit of each item sold. This year with cheaper costs, if selling at $1.5, i should be able to get 37.5 cents of profit, and that's a whopping 37.5 yen with current yen value.

However, as i've said, my field's margin is low due to heavy competitions. I've been losing grounds to other makers because of their lower cost productions. Now with this extra profit, i rather spend it to get back the market share that i've lost in all those years. After all, if i'm able to sell more products compared to last year, my profits will also increase. Last year i made 20 yen profit per item, this year too i'll keep that 20 yen and the rest will be spend on getting back that market share. So instead of selling at $1.5 (150 yen), i'm selling it at $1.325 (132 yen) (150-17.5=132.5 yen or 132 or 133 yen rounding up, all up to you guys).

Compared to last year, my export went from 120 yen to 132 yen, a 9% increase in term of yen (10% if calculate at 133 yen). However, in term of USD, my export fell from $1.5 to $1.32.

My products will be cheaper compared to last year in overseas, thus i will be able to increase market shares in this year. Also, I'd still be able to pay this year bonus to my employees the same as last year. However, in term of USD, if i want to make more profits, i simply have to sell more.

While in real life, companies have different cost structures, a 50% in raw materials and utilities are rather high. Also, the reason i decided to go with a low profit margin example is to match with the current Japan business conditions. After all, the current Japan isn't what it was 30 years go when it was the top of the world in many industries in which it was free to fixed prices.

This pattern only apply to countries with super low inflation or in a delation such as Japan. If apply in countries such as emerging economies, where high inflation is a norm, inflation pressure will eliminate all those price cut options.

0 ( +0 / -0 )

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