Currency market – Japan: Imports vs exports and producer prices

The Japanese economic system begins with a positive rise in monthly Producer Prices from 0.1 in July to 0.3 for August. At 0.3 matches April's highs at 0.3 but far below the 1.0 reading in October 2022. The yearly reading at 3.2 represents a low from 10.06 in December 2022 and not seen in 2022 and 2023.

The predominant driver to Producer Prices for all nations are Commodities and for Japan Petroleum, gas and electricity.

The positive result for Producer Prices provided a higher outcome to the monthly 1.9 issue to Exports. Exports are now running 1.9 as monthlies vs 3.7 on a yearly basis and up from -0.2 and -0.5 on a yearly value.

Imports at monthly 0.9 rose from -0.6 and yearly values at current -11.8 dropped from -14.4 in July . Imports for all nations, particularly Japan is factored by the Oil price. Higher Oil prices drops exports as imports rise.

The current relationship in Producer Prices Vs Imports and Exports assures the BOJ not only won't intervene to USD/JPY but comments to levels will disappear.

Recall last July. Producer Prices Vs Imports and Exports were on the edge to negative as Imports higher than exports. This explains the BOJ comments to USD/JPY. But this is also the 1990's approach to lower USD/JPY. The BOJ still believes words alone will drop USD/JPY.

When BOJ officials comment to USD/JPY levels, end of month is always the opportune time. The message is the BOJ are concerned to Imports and exports as both are primary drivers to Japanese economics. Imports and exports are primary drivers to every nation but the western world literally fell asleep to most vital economic indicators.

Exports at monthly 1.9 and 3.7 yearly Vs monthly imports 0.9 and -11.8 is healthy and positive economically. The constructive aspect is Inflation is set to drop and GDP will travel higher. The higher goes exports in the future then more confidence exists to no question to higher GDP and lower Inflation.

Economically, Japan is in recovery mode. Imports achieved highs in 2022 / 2023 and bottoms for Exports. Exports are now on the rise as imports continue to drop. Producer prices and Exports contain a long way to travel higher. The continuation will ensure GDP trades higher and lower to Inflation.

The Japanese recovery will come extraordinarily slow because of the small numbers in the Japanese System but also because Commodities must drop and western nations must also find a bottom to their current destructive ways.

The concern to Japan is the index values as Imports trade 158.00 Vs Exports at 133. and Producer Prices at 119.00. Higher Producer Prices and Exports must continue their winning ways in the months ahead in order for economic recovery to continue.

An interest rate change to the BOJ is viewed as impossible at the present time as a change even by the standard 0.10 would wreck the economic recovery and force the BOJ to completely  re work a system working so perfectly.

Japanese Banks remain profitable and the positive is all learned perfectly how to trade Japanese Call Rates by the 3 Tiered system. A paper for another day.

Inflation is the BOJ's greatest concern and only an out of control Inflation rate would force the BOJ to change YCC bands and interest rates. This is not expected unless the western nations force a change by the chaos reaped on their nations.

Overall, the BOJ is an extraordinary Central bank as they worked extremely hard over years to put together literally a perfect economic system and all the bases are covered in detail.