Japan's trade deficit shrinks in May as energy imports fall

On Wednesday, the finance ministry said Japan’s May trade deficit narrowed 8.3% from a year ago to 909 billion yen, marking the 23rd consecutive monthly shortfall.

feeling sorry for those listening to series of lectures on Abenomics for 1-1/2 years.

During April and May we didn't need neither air conditioning nor heating. Let's see the next months.

It added that the “BOJ should act quickly if actual or expected inflation stagnates or growth disappoints”.

Growth is already disappointing, and the only inflation which has occurred is due to the central bank dilluting the currency supply. This is not the type of inflation we need.

sangetsu03Jun. 18, 2014 - 12:15PM JST

the only inflation which has occurred is due to the central bank dilluting the currency supply.

During deflationary period, "inflation which has occurred due to the central bank dilluting the currency" is GOOD inflation. The bad inflation is one caused by increacing cost.

Japan's trade deficit shrinks in May may be short lived given the dynamics in the play.

In related news, Japan’s exports, in May, dropped 2.7 %, a much stiffer slide than 0.2 % drop polled by economists. Put the exports data in its context, in April, Japan’s exports had 5.1 % rise.

Falling exports combines with a stalled/slowing domestic consumptions due to the impacts of tax increase could add pressure to Japan's economy. On top of that, Iraqi sectarian violence crisis will inevitably affect fossil fuel markets, the a sudden spike of cruel oil prices (a 6% increase of cruel prices has already taken hold since last week) on the markets may widen Japan’s trade deficit in June.

Puting those Ingredients together, it may leave BOJ little choice but taking a more active role to do somthing even it clearly doesn’t want to.

During deflationary period, "inflation which has occurred due to the central bank dilluting the currency" is GOOD inflation. The bad inflation is one caused by increacing cost.

Wrong. So-called demand-pull inflation occurs when demand exceeds supply. The increase in demand and prices causes suppliers to increase production to meet demand, which means they have to buy more materials, and hire more people to make their products. This is the basis of economic growth, and economic growth is what Japan needs.

Inflation caused by dilluting the currency does not increase demand for goods, in fact, it causes demand to fall, because people can buy less with the money they have. The government needs inflation in one way or the other to manage it's massive debts, as these debts are not tied to the rate of inflation. If there is 2% annual inflation, the national debt decreases by 2% per year. But when the government creates inflation by diluting the money supply, they are not helping the economy to grow, they are merely reducing the value of your labor to reduce their own debts. Causing an annual inflation rate of 2% by diluting the money reduces the value of your income by 2%. And since this kind of inflation reduces economic growth, your employer (who must now pay 2% more for materials and expenses) is unlikely to raise your pay to make up for the 2% loss.

Deflation occurs when supply exceeds demand. With a fallng population, and the cost of goods having been overpriced for decades, deflation is a natural and obvious event. And deflation is not a bad thing for you and I. If there is 2% annual deflation, this equates to our getting a 2% annual raise in pay. But 2% annual deflation increases the weight of the governments debt burden by 2% per year, understand?

We don't need inflation in Japan, we need growth.

A subtle point, if I may.

If there is 2% annual inflation, the national debt decreases by 2% per year.

It might if the government weren't adding an extra 40 trillion yen of debt each year!

A subtle point, if I may. It might if the government weren't adding an extra 40 trillion yen of debt each year!

The debt right now is more than 1000 trillion yen. 2% inflation would negate that extra 40 trillion of added annual debt.

Governments and kingdoms have long played with the value of their coins, money, and currency to make repaying their debts easier. In the past this was done by diluting the purity of their gold and silver coins. In the past, one UK pound was actually worth one full pound (16 ounces) of silver. But over the years the various kings and rulers steadily robbed their creditors by repaying them with coins which contained less and less precious metal. It will now take £186 to buy one pound (16 ounces) of silver. How's that for inflation?

It's quite funny that governments have enacted "easing" and asset-buying programs, and people haven't stopped to think and understand that governments are stealing the value of the economy's labor and currency to finance their fiscal irresponsibility. That 2% inflation goal that the BOJ has set is 2% of the value of your work, as well as 2% of whatever money you have put away. Don't hold your breath waiting for your company to raise your pay 2% to help you make ends meet, because your company has also lost 2% of it's income, and lost 2% of it's savings as well.

The world's central banks are essentilally stealing the value of all the work we do, and everything we are paid. Why aren't people upset about this? Are people really this stupid?

The debt right now is more than 1000 trillion yen. 2% inflation would negate that extra 40 trillion of added annual debt.

By my reckoning 2% of 1000 is 20 so inflation will negate 20 trillion of the existing debt each year, but the government is adding another 40 trillion annually, so in real terms the debt load will still go up. (Leading to the conclusion they'll need some combination of more inflation, more taxes and less spending.)

The upside of inflation is that it'll hit those on fixed incomes such as Japan's wealthy elderly pensioners more so than the younger workers. Given years of voting for the wrong politicians, the elderly should bear more of the responsibility too, IMO.

(Leading to the conclusion they'll need some combination of more inflation, more taxes and less spending.)

Japan needs growth, more taxes and inflation will only shrink the economy further. Less spending, leading to decreased taxes, would lead to more money in the private sector. More money in the private sector would lead to increased private-sector spending, and this extra spending ought to result in increased demand, and the type of demand-pull inflation which would fuel growth. But the government will not reduce public-sector spending nor will it lower taxes. As Bill Clinton once said, "Japan is between two rocks."

In theory growth would be great, but unfortunately in Japan's case I don't see that that alone is going to cut it.

See page 2: http://www.mof.go.jp/english/budget/budget/fy2014/02.pdf

As the graph illustrates, even during the heady days of the bubble economy Japan's tax revenues peaked at 60 trillion yen. Tax revenues are down now, and to make matters worse government spending is up.

So sure higher taxes may shrink the economy (and inflation might too in real terms at least), but I suspect the thing that would shrink the economy the most is the government failing to get it's fiscal house in order.

Less spending alone won't enable taxes to be reduced either, because the government is borrowing to cover half it's budget, not spending just tax revenue.

None of the options are nice, but of all of them high inflation seems like it'd be the most politically palatable.