Japan’s contentious current-account surplus also means millions of US jobs
TOKYO: Thanks to its bilateral trade balance with the United States, and its current-account surplus with the rest of the world, Japan finds itself on America’s watch list for currency manipulators at a time when the Trump administration is turning up the heat on economic friends and foes alike.
While there’s no argument that Japan exports twice as much to the US as it takes in imports, it has reason to grumble about taking flak over its current-account surplus, which also includes income from overseas investments.
Unlike the other nations on the watch list, Japan’s current-account surplus mostly comprises the returns from investments, in the US and elsewhere, not the profits from trade.
Put another way, Japan finds itself in hot water partly because it’s making money from such things as auto factories it has built in the US, creating American jobs.
During the presidential campaign and early in his administration, President Donald Trump singled out Japan for criticism on its currency and trade policies, and with Vice-President Mike Pence headed to Tokyo soon for economic talks, that surplus is one of the issues that Japanese Prime Minister Shinzo Abe must consider.
Income from Japanese investments overseas was almost four times larger than profits from trade last year.
To be sure, Japan exports more to the US than it imports, and this trade portion is more than half the current-account surplus with the US.
But even then, Japan was the second-largest investor into the US in 2015, with holdings worth more than US$400 billion (RM1.77 trillion), and the head of currency policy at Japan’s Ministry of Finance plans to explain that to the US.
“Supporting the current-account surplus is Japanese investment into the US and I want to gain the understanding of the Trump administration,” said Masatsugu Asakawa yesterday.
Japanese carmakers by themselves supported more than 1.5 million US jobs in late 2015, according to a report prepared for the Japan Automobile Manufacturers Association. Bloomberg