Japanese Current Account Surplus Soars-Again

Again illustrating how undervalued the Japanese yen is the latest statistics showing how the Japanese current account surplus soared 46% to ¥ 2.22 trillion in October ( roughly $20 billion or €13.5 billion). This despite the sharp increase in oil prices. All 4 mayor economies of the world, the U.S., Japan, China and Germany has all seen their trade surpluses increase dramatically or decrease significantly compared to last year. But the sharp increase in oil prices meant that for the U.S., China and Germany, the improvement dramatically slowed in October. In Japan, however, the surplus continues to grow rapidly.

This is a result of how the structurally lower price inflation in Japan have meant in combination with a falling yen that the real exchange rate of the yen has fallen dramatically. The yen is still 10% lower against the U.S. dollar than in early 2000. And during that time cumulative price inflation have been some 25% higher in America than in Japan. At least. And the real depreciation against the euro has been even greater. Meanwhile, as Japan have had price deflation and as loan demand has been weak, monetary conditions in Japan have been relatively tight, holding back domestic demand.

The result is that the Japanese current account surplus is at a record high, both in absolute terms and as a share of GDP or GNP. The main reason why this haven't started the same kind of political outcry in America as in the 1980's is that most Americans are focused on that other, younger, demographically 10 times bigger and more rapidly growing "Yellow peril", China.