Column: The annual trade deficit is at a pace of 20 trillion yen, and if left unchecked, the Japanese version of the “twin deficit” | Reuters

TOKYO (Reuters) – The trade deficit in the first half of fiscal 2022 is expected to hit the 11 trillion yen mark, raising the possibility that the annual trade deficit will reach the 20 trillion yen mark. The international balance of payments also fell into the red for the second straight month after seasonal adjustment in July and August of this year, and a “yellow light” is beginning to light on the outlook for the international balance of payments. If the expansion of the trade deficit is left as it is, it is possible that the balance of payments will continue to be in the red at some point.

On October 20, the trade deficit for the first half of fiscal 2022 reached the 11 trillion yen level, raising the possibility that it will swell to the 20 trillion yen level for the year. Photographed in Tokyo in February, 2022. REUTERS/Kim Kyung-Hoon

If we were to face the “twin deficits” of the budget deficit and the current account deficit, as in the United States in the 1980s, the yen in Japan, which is not a key currency nation, would continue to depreciate, leading to inflation driven by rising import prices. You can also see the ′′ future map ′′ that will be hit.

In order to avoid this situation, it is necessary to take measures now to overcome the trade deficit. However, the Fumio Kishida government’s comprehensive economic measures under consideration do not include any conspicuous countermeasures against the trade deficit. Isn’t this a policy response that requires not only support for electricity bills, but also measures for domestic repatriation by Japanese companies?

The trade balance for the April-September 2022 period announced by the Ministry of Finance on the 20th showed a cumulative deficit of 11.0075 trillion yen, the largest ever on a half-year basis. In addition to the seasonality of the second half of the year, the trade deficit is likely to increase, and considering the possibility of further depreciation of the yen, the possibility of a trade deficit of 20 trillion yen for the whole of fiscal 2022 is increasing.

Looking at the latest data for the month of September, automobiles, which can be said to be the “fourth hitter” among Japan’s export industries, increased significantly by 122.2% from the previous year. However, import growth (up 45.9% year-on-year) greatly exceeded export growth (up 28.9% year-on-year), posting a deficit of 2.0939 trillion yen.

The rise in energy prices, including crude oil, and the depreciation of the yen have had a double impact, creating a phenomenon in which the trade deficit is increasing despite the significant depreciation of the yen. If the yen were weaker, the export volume would have increased sharply due to the price effect, but from March to August this year, it remained negative on a year-on-year basis. stayed. As a result of shifting manufacturing bases overseas, it is possible that the export drive has become ineffective.

Therefore, rather than saying that the increase in the trade deficit is temporary, as some experts say, it would be better to view it as a structural problem that is making it easier for a huge trade deficit to arise.

In fact, the balance of payments for July and August of this year, when seasonally adjusted, fell to 629 billion yen and 530.5 billion yen, falling into the red for two consecutive months. This is one evidence that the surplus in the primary income balance has become unable to absorb the trade deficit.

In fiscal 2021, when the primary income balance and secondary income balance were combined, the surplus was 19.091 trillion yen. Assuming that the same level is maintained in fiscal 2022, if the trade balance turns into a deficit of 20 trillion yen, the current account balance could turn into a deficit for the year. The view that it is a mistake to be overwhelmed by the size of the trade deficit is likely to be overly optimistic when looking at the medium- to long-term outlook for the Japanese economy.

What will happen if Japan’s current account balance slips from a surplus to a deficit in the near future and that trend continues? At the end of 2021, Japan will have net foreign assets of 411,184.1 billion yen, and the current British Pound Crisis will not occur immediately.

However, Japan already has a debt of over 1,000 trillion yen. There is also a risk that people will become conscious of

In the 1980s, the United States had a “twin deficit” of a current account deficit and a budget deficit, but the strength of the key currency, the dollar, was used to generate capital inflows into the United States with high interest rates as a weapon.

However, if the existence of the twin deficits in Japan comes to the fore, the yen, which is not a key currency, will continue to depreciate. This will create a chain of depreciation and accelerate the rise in import prices.

As a result, Japan’s low inflation rate will become a thing of the past, and it is expected that the possibility of realizing a scenario in which Japan will face constant inflation increases accordingly.

Some experts believe that the declining birthrate, which is currently occurring, could have been mitigated considerably if proper measures were taken in the 1990s. I believe that efforts to change the structure of the accumulating trade deficit can be dealt with if we start now.

The first measures to be taken are measures to significantly promote the return of manufacturing to the domestic market. Companies that move their manufacturing sites to Japan should take drastic tax cuts. The financial resources should be dealt with by imposing a tax on accumulated retained earnings and by increasing taxation on companies that are reluctant to return to Japan.

I would like the government to focus on using “living money” in the direction of strengthening “earning power.” Indefinite support for companies that have lost their competitiveness will not lead to a revitalization of the Japanese economy, nor will it contribute to returning the trade balance to surplus.

I would like Prime Minister Kishida to face up to the reality of the current expanding trade deficit and appeal to the public to break away from the “path to decline” by aiming for a turnaround. The most terrifying development is that the situation, which can be called a balance of payments crisis in London, is left unattended as a “fire on the other side.”

Why is it that even though the trade deficit has reached 20 trillion yen, the question “Are you really okay?” If Prime Minister Kishida demonstrates his leadership, it will soon be reflected in public opinion polls.

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