business

Japan's trade deficit quadruples on-year in March to Y1.45 tril

28 Comments

Japan's trade deficit quadrupled on-year in March to 1.45 trillion yen, data showed Monday, with a weak yen compounding surging imports as consumers rushed to buy ahead of a rise in sales tax.

Japan imported 1.45 trillion yen worth of goods more than it exported in the month, the finance ministry said, compared with a shortfall of 356.9 billion yen in March 2013.

Exports rose 1.8% to 6.38 trillion yen, thanks to higher shipments of cars and processed fuel products.

But imports grew a much faster 18.1% to 7.83 trillion yen due to higher imports of crude oil and liquefied natural gas as resource-poor Japan raced to plug its energy gap.

For the fiscal year to March, Japan logged a record largest trade deficit of 13.75 trillion yen.

A 17.3% rise in imports from a year earlier to 84.61 trillion yen caused by post-Fukushima energy bills overwhelmed a 10.8% jump in exports to 70.86 trillion yen, according to data issued by the finance ministry.

Junko Nishioka, chief economist at RBS Securities Japan, attributed the jump in imports to expectations for a last-minute surge in consumer spending before the April 1 sales tax hike.

Compared with before the March 2011 disaster, "a weaker yen hasn't increased export volume as much as it used to," she said.

"That is to say Japanese firms aren't as competitive as before," she told Dow Jones Newswires.

"It remains difficult for exports to recover even if overseas economies improve. There is a risk of increasing imports and ballooning trade deficits," she said.

Energy import needs soared after the 2011 Fukushima crisis forced the shutdown of Japan's nuclear reactors, which once supplied a third of the nation's power.

A sharp decline in the yen, while good for exporters' profitability, has also forced up the cost of importing.

The yen was an average 8.7% cheaper against the dollar in March compared with the year-before level, according to customs data.

Japanese domestic demand for gasoline and other products also picked up in March ahead of the April 1 sales tax hike from 5% to 8%.

© (c) 2014 AFP

©2020 GPlusMedia Inc.

28 Comments
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G.MAL.O.QAPR,

But current account balance went back to being positive last month.

Alas a single positive result in one month does not represent a change in the underlying trend, which to my eyes looks down (look at some longer term charts of the current account data, post 2007 it's not pretty).

JeffLee,

Ask them why after 14 years of QE Japan ends up with deflation, as opposed to the "hyper inflation" they predicted,

It's unclear who the "they" is that you are refering to, but if Japan had deflation after 14 years of QE then it suggests that QE might not produce the intended results, does it not?

I don't find much to admire in an attitude that is completely oblivious to risks. Something that has not happened does not necessarily have a zero risk. And history in Japan itself has produced an example of a government spending money unsustainably ultimately resulting in the citizens getting screwed over badly. I don't see any compelling reason to believe that this time will be different.

0 ( +0 / -0 )

Check out what happen in the US with QE. Japan is mainly doing the same thing. In the US, the money being lent and circulating in the system has been tanking ever since the FED started QE. No "printing" is happening.

Thru QE the private Federal Reserve bought alot of their own "debt."

A simple solution to the impasse is as follows: Federal Reserve Chairman Ben Bernanke should simply cancel the Treasury debt that it owns. The government can just forgive the government's debt. This wouldn't solve the debt problem entirely. The Federal Reserve doesn't own all U.S. government debt; it owns only roughly $2 trillion of it. (Well $2,076,927,000,000.00, as of last Wednesday, but who's counting?)

0 ( +0 / -0 )

G.MAL.O.Q, it is nice to have a person versed in economics on this board. I'm sure you noticed the discrepancy: if the jump in imports is due to consumer purchasing in anticipation of the rise in the consumption tax, why is it composed primarily of energy? Are people stockpiling gasoline?

1 ( +1 / -0 )

If Japanese companies had the capability to still produce exports in Japan then there would still be a trade surplus. Most electronic goods are mass produced in China. The car makers have basically left Japan too. Ask why China booms and Japan does not-it's simple......

1 ( +1 / -0 )

So where is the BOJ getting the money to buy the bonds so that the banks can make more loans to regular people and businesses? The BOJ prints it, well most of it because interest on the current debt is 25% of current tax revenue! and no one is buying the bonds anymore. And regular people are not taking on loans anymore. So who borrows this money? Big construction and stock speculation from public pension funds, both pumping up what is left of the economy after consumer demand drops like a stone due to consumption tax increase.

1 ( +1 / -0 )

This will go on until they turn the nukes back on.

0 ( +0 / -0 )

Uh-huh, it's not monetization, everything is fine folks, nothing to worry about. Carry on consuming. There is no hyperinflation, but my favorite cereal that used to be 500g is now 300g per package. That's 30% inflation to me not hyper but almost.

1 ( +1 / -0 )

I knew that Abenomics would only speed up Japan's decline even before it was implemented at the end of 2012.

-2 ( +0 / -2 )

@G.MAL.O.Q:

I feel your pain. There's a whole worldview based around this ignorance of how the monetary system works.

I believe it started with pundits calling QE "money printing" because the phrase could fit into headline space. It's a figurative expression, and a misleading one at that, but a significant number of people now take the expression literally.

Ask them why after 14 years of QE Japan ends up with deflation, as opposed to the "hyper inflation" they predicted, and they go off in all sorts of bizarre directions. Yet they will never admit they were wrong and they continue to grasp onto a worldview that has given them nothing but predictions that never materialize.

0 ( +1 / -1 )

@gaijinfo,

You are all over the place. There is no euphemism : "printing money" can be real, increasing the base is something completely different…I was waiting for you to recommend buying gold.

I suggest you read the recent paper of the Bank of England on the way a modern monetary system works (for info the UK uses the Pound which is not the main world reserve currency like the Yen, so Japan and the UK are similar)

You can also try to look up what was written by the Bank of International of Settlements (the central bank of banks) that basically explain the same thing, only 4 years before.

Those guys are quite knowledgable, they actually do the accountancy for what happens in the system. They are no posers in comments section of news websites.

A warning : it is dense, there are no exclamation marks, nothing's written is capital letter. No crass statements are made, like you seem so fond of…Just a thorough explanation on how things work.

Enjoy the reading…or not. I am off to better things.

0 ( +1 / -1 )

This does not automatically mean "money printing"

Right. And pachinko isn't actually gambling, because you're actually swapping little metal balls for toys and then toys for money.

Besides, "money printing" is a euphemism for "increasing the monetary base," regardless of any bond-swap technicalities.

And the U.S. is not comparable, since it holds the reserve currency, and it has the luxury of exporting inflation.

However, you are correct in that doubling the money supply (which Abe specifically said he wanted to do) won't create inflation if it sits in the banks, even though that's PRECISELY why Abe wanted to increase the money supply.

Bottom line is that printing money (or whatever term your comfortable with) is GOOD for governments, GOOD for exporters, and an absolute nightmare for everybody else.

Whenever countries have started printing money (or increasing the monetary supply or debasing the currency or whatever other term you're comfortable with) as an economic solution, it has NEVER ended well.

Never.

Crack.

Up.

Boom.

3 ( +4 / -1 )

So weaker yen is killing me and Japan as well :P . So whats up with govt? why do they want cheaper yen?

The yen is not cheap. Were you being killed in 1996 when the exchange rate was 130 yen to the dollar? Or how about 1983 when it was 300 yen to the dollar?

The government wants a weaker yen for two reasons; first, it makes Japanese-manufactured imports cheaper overseas, and second, they need inflation to occur in Japan. With the national debt now at over one quadrillion yen (one thousand trillion) and the government spending record amounts of money this year, and for the next many years, there is no hope getting a handle on the debt unless they can inflate some of it away, as the national debt is not tied to the rate of inflation.

1 ( +2 / -1 )

solar on every rooftop

This will only help if homes can have the batteries to store the power. They're just too expensive now. Having the panels connected to the power lines causes a lot of problems when trying to keep the electricity balanced.

0 ( +1 / -1 )

@gaijinifo,

What a mess of an attempt to teach readers economics...

I would not even know where to start to argue with the statements you deliver with some much confidence.

The BOJ is not printing money, it is mainly increasing the monetary base by swapping long dated assets (bonds) for short dated ones, mainly in the form of bank reserves (bonds are sold, the money goes to your current account)

This does not automatically mean "money printing" since banks decide when or if to lend. If banks wish not to lend because it is deemed not profitable or too risky, they will refrain from doing so, big reserves or not.

Check out what happen in the US with QE. Japan is mainly doing the same thing. In the US, the money being lent and circulating in the system has been tanking ever since the FED started QE. No "printing" is happening.

Any 1st year student in economics knows that the money multiplier is a myth.

Next, when you write that, just forget it ; it is just too cumbersome to try to explain to you how the modern monetary system works nowadays.

0 ( +3 / -3 )

@gaijinifo ... hold on dude it was a joke, no need to add a page about it LOL ... My focus was "lower yen is beneficial to big company, WHILE poor like me and Japan loves stronger yen”

-1 ( +1 / -2 )

Many other countries survive without N power? What makes Japan so unique?

-2 ( +2 / -4 )

gaijinfo There is NO WAY the economic situation in Japan is going to end well. It is MATHEMATICALLY impossible. yep same can be said for the US, UK and many other EU countries, when one of the big players falls the rest will come down with them.

-3 ( +2 / -5 )

Japan should be pushing to install solar on every rooftop and wind where possible, hydro is already pretty good. But nope, we see roads to nowhere and the usual construction companies raking it in. structural reforms my eye. why is solar 3-4x the price of other g8 countries? Let's go Abe, get a move on

3 ( +4 / -1 )

So whats up with govt? why do they want cheaper yen?

Cheaper yen is better for exporters. Big companies (Mitsubishi, Toyota, etc). You get cheaper yen by printing more money. But you don't just print it. You "monetize the debt." Meaning this allows the government to spend much more than they take in from taxes.

Big companies win, as they get easier profits (cheaper yen makes for more experts)

Governments win, as they get to spend money made literally from thin air.

ALSO (this is VERY important) a weakening yen is much better for those who owe a crapload of money. Who owes the most money? The government, that's who.

So a cheaper yen helps big companies, and the government.

It also fuels inflation, which is IMPOSSIBLE to stop once it gets out of hand.

Right now, the government spends a HUGE amount of it's take on it's debt, which is based on ultra low interest rates.

The ONLY way to REDUCE inflation, if it does get out of hand, is to DECREASE the money supply, which would raise interest rates. If the interest rates in Japan went over 6%, then the TOTAL AMOUNT of taxes would ONLY pay the INTEREST on the debt. NOTHING ELSE.

Bottom line is Japan has painted it into a corner, and there is NO WAY OUT.

Literally.

There is NO WAY the economic situation in Japan is going to end well.

It is MATHEMATICALLY impossible.

8 ( +10 / -2 )

Yaaaaaawn….

But current account balance went back to being positive last month.

-2 ( +1 / -3 )

Abenomics yet to show it's color ?!

-1 ( +1 / -2 )

Hmmmm, nuclear reactors! The one mistake at Fukushima is gonna end up costing Japan nearly as much as it did to build all the reactors in the country. Yeah, Japan is hurting at present cos of their reliance on fossils fuels, but the thing that confuses me is, why isn't there a major push to conserve energy and to introduce renewables? It seems to me that, the government is just playing on these facts to gain public support for restarting the reactors. However, on the other hand, the lack of willingness by the J-Gov to join the TPP is also creating huge issues for the deficit. Japan needs to flood the market with cheaper imported goods to improve consumer spending and stop trying to protect their ages old subsidy system that created their huge public debt in the first place. The world economy has changed in the last 30 years, but Japan has not, hence the failing economy with no clear way out until they change their selfish policies.

4 ( +6 / -2 )

So weaker yen is killing me and Japan as well :P . So whats up with govt? why do they want cheaper yen?

0 ( +3 / -3 )

How about doing a little exercise, imagine no fukushima disaster and the yen was where it was prior to 2008, how would the figures be then ?

Get rid of the dependence on oil for energy and things will look a lot better.

0 ( +5 / -5 )

This is why, for the time being, Japan needs to get those reactors on ASAP.

They can get rid of nuclear energy, its the smart move in the long run, but they need a suitable alternative to fossil fuels NOW or this will just keep getting worse and worse.

1 ( +5 / -4 )

@hokkaido for Japan a weak currency is better as it makes imports more expensive and exports cheaper, people tend to buy Japanse made keeping more money in the country. this is assuming you have nuclear power as you dont need to import as much fossil fuels to power the country. many cheap import lovers will say otherwise, but if you look at all the successful economies of the last 100 years theyve all be mostly export countries, bringing in more money than theyve sent out. simple economics really

0 ( +1 / -1 )

It depends on the priorities. Japan tends to stress its exports while it expects more and more of its nukes to come online. So it generally wants a weak yen.

2 ( +3 / -1 )

I'm no economist and no nothing about currency manipulation, so maybe someone out there can answer the question: is it better to have a strong currency or one that is roughly equal to other industrialized nations?

Based on Japan's situation, it really seems like it's all a wash. A strong currency limits exports but lowers the cost of imports and a competitive currency is vice versa.

2 ( +2 / -0 )

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