日本贸易出现赤字的原因分析--美国Economics assignment代写范文

美国Economics assignment代写范文:“日本贸易出现赤字的原因分析”，这篇论文主要描述的是日本在2011年爆发的核危机事件使得日本的经济开始走向疲弱，日本在贸易方面也开始出现了不断加剧的贸易赤字危机，这与日本能源价格过高需要进口化石燃料来满足能源的需求有着一定的关系，日本的这种贸易不平衡直接导致这日本经济复兴迟迟到不到有效的进展。

The article reports the deteriorating trade deficit in Japan which had increased to ￥907.26 billion in May, exceeding forecasts. This is mainly due to the relative strength of their currency and the weak global economic outlook. However, it is also partly attributed to higher energy prices, as imports for fossil fuels had increased in the wake of the nuclear crisis in 2011 and the subsequent abandonment of nuclear power. The persistence of this trade imbalance threatens the economic recovery of Japan as their economy is driven primarily by exports. Any sustained recovery of the Japanese economy depends on global demand.

Key Concepts

Exchange rates

The exchange rate is the price of one currency in terms of the other. For example, if the exchange rate of the Singapore dollar vis-à-vis the Malaysian ringgit SGD/MYR is 2.4978, one Sing dollar gets 2.50 ringgit at the current spot rate. A stronger currency make goods from abroad more attractive and render domestic goods for the rest of the world less competitive. Hence net exports tend to decrease when a country's currency becomes stronger, affecting aggregate demand and hence, economic growth.

There are 3 exchange rate systems in the world.

Flexible exchange rates

Exchange rates under this regime is entirely determined by demand and supply in the foreign exchange market. The government does not intervene to affect the exchange rate.

Graphically, the equilibrium in the foreign exchange market is where the demand curve for the domestic currency intersects the supply curve of the domestic currency:

1.Fixed exchange rates

This is where the exchange rate is fixed by the government and it is maintained by the central bank at its pre-determined level by buying or selling the foreign exchange reserves. Many countries have abandoned using fixed exchange rates because they lose control of domestic interest rates. However, Hong Kong still operates under a fixed exchange rate regime to the US dollar.

Crawling peg exchange rates

This is somehow similar to the fixed exchange rate, however it is not fixed to just that country currencies. It will be determined by the government and it might changed in fixed or random interval. Often, the developing countries will use this crawling peg exchange rates trying to control the inflation.

There are several factors that affect the exchange rate:

Price level differences between two countries

A country with a lower inflation rate compared to another country tend to have a stronger currency and their purchasing power increases when inflation is low. Intuitively, when prices rise more slowly, buying power of the country is maintained. (6 Factors That Influence Exchange Rates)

Interest rates

Higher interest rates attract investors due to higher yield. Hence, a country with a higher interest rate compared to another tend to attract foreign capital and hence, demand for its currency and this leads rising currency value. (6 Factors That Influence Exchange Rates)

Current account balance

A country running a current account deficit means that it is exporting less than importing. Thus, there is excess demand for foreign currency than the domestic currency and this lowers the exchange rate. (6 Factors That Influence Exchange Rates)

Consider that a foreign country's GDP has expanded compared to Singapore. As the foreign country's economy expands, it demand more goods and services from Singapore. This increases the demand for the Sing dollar and results in an appreciation of the currency against the foreign country's currency:

2.The demand curve for the Sing dollar shifts to the right and this results in a new equilibrium point where the exchange rate is. The Sing dollar has appreciated because the price of the currency in terms of the foreign currency has increases. Hence, it requires more foreign currency units to buy a given amount of the Sing dollar.

Balance of Payments

The balance of payments is an account of all monetary transactions between a country and the rest of the world. The two primary components of the balance of payments is the current account and the capital account. Changes in reserves of the central bank ensures that the balance of payments is indeed balanced.

The current account is associated with the trade balance. If the exports of a country rises, the current account improves and the country accumulates foreign currency.

The current account can be subdivided into 3 separate components:

Merchandise trade balance

Export of goods minus Import of goods (Understanding The Current Account In The Balance Of Payments)

Balance of services

Value of services exported minus value of services imported. (Understanding The Current Account In The Balance Of Payments)

Net unilateral transfers

Unilateral transfers from other countries minus unilateral transfers given by the domestic government, firms and residents to other countries. (Understanding The Current Account In The Balance Of Payments)

3.The capital account/financial account reflects net change in national ownership of assets and is a source of foreign currency by investors abroad who want to hold domestic assets.

A deficit in the current account can be entirely covered by a surplus in the capital account. However, if both accounts are in surplus, then there is excess supply of foreign currency which is accumulated by the domestic central bank and this affects the domestic money supply if the country is operating a fixed exchange rate.

However, if the country is using a flexible exchange rate system, the nominal exchange rate will adjust to equate the demand for foreign currency.

Analysis

This article states that Japan's trade balance turn worst in the month of May. This means that the country is exporting lesser than it is importing, generating a current account deficit. It then points to the negative effect it has on the nation's economic recovery.

When a nation is running a trade deficit, it is essentially spending more than what it is earning - a situation falling net exports. To finance a trade deficit the country has to borrow from abroad to finance its higher consumption at home. Thus, by running persistent and larger current account deficits, it is increasing its net indebtedness to the rest of the world. This is why the deteriorating trade deficit is such a concern for Japan.

The drastic move away from nuclear energy to more conventional ones exposes the country to high energy prices which, together with a strong domestic currency, further worsen the current account. The Japanese Yen has been appreciating due to the recent economic environment. As the prospect of slow growth impacts investment sentiment, there has been a shift into the Yen as a safe haven asset. However, a current account deficit usually results in a weaker currency. The net effect on the Yen will depend on the relative strength of those factors.

Japan's unique circumstances puts the country into a dangerous position. Perhaps this is why exports plays a much more vital role for its economy. Facing a rapidly aging population and after decade a economic malaise which put Japan into a chronic deflation, savings rates of consumers have been falling and this affects the government's ability to finance its deficits. Conventional monetary policies are ineffective as interest rates are at a near zero.

Furthermore, the 2011 earthquake led to increased the spending by the Japanese government in an era of high public debt. Thus, Japan is fiscally constrained and can do little to counter a negative trade balance without risking a sovereign downgrade by ratings agencies. To address their fiscal problems, the government has recently planned to raise its consumption taxes. While in the longer-term this policy move is rational, in the short term it is an absurdity precisely because it is contractionary. An increase in the consumption taxes reduces consumption.

By analyzing the components of aggregate demand (AD), we can analytically see why Japan's situation is so troubling :

4

The last component of the aggregate demand is similar to the current account. The fall in net exports is attributable to the perception of the Japanese Yen as a safe haven currency and to the fall in global demand. A weak global economy sends investors fleeing into the Yen and thus, this increases the demand for the Japanese currency. This has the effect of shifting the demand for Yen to the right:

The stronger the Yen increases the purchasing power of Japanese citizens for foreign goods while at the same time lowering the purchasing power of other countries citizens for local goods. Thus, net exports fall.

5

Using the AD-AS diagram, we can show the detrimental effects on the country. Since aggregate demand in an economy consists of net exports, a fall in net exports constitute a decrease in AD and the curve shifts left. The eventual increase in consumption taxes will also adversely affect aggregate demand and further shift AD to the left. As a result, it is easy to understand why economic recovery might be affected as real GDP falls.

It is also noted that deflation might get worse as aggregate demand contracts. Due to lesser demand in the economy, the price level also falls.

Conclusion 结论

The Japanese economic puzzle is extremely hard to solve. Indeed, the Japanese themselves have been dragging their feet towards a solution. Undeniably, it all started when the Japanese housing bubble burst in the early 1990s which resulted in a ''lost decade''.(Bubble Burst) The slow recovery has been worsen by the great financial crisis, an unfortunate natural disaster and more importantly, the lack of political direction in Japan toward solving their problems. The primary concern to address is that of economic growth. However, in order to rely less on exports Japan has to solve its longer-term structural problems in order to increase domestic consumption. However, escaping from the chronic deflationary environment in the shorter term is also paramount. The best hope for their economy is for exports to improve on the backdrop of global economic recovery. This would give a short-term growth boost to Japan while it consolidates its political will to tackle its longer-term challenges.

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