True or False: Japan generally runs a significant trade surplus because of low Japanese demand for foreign goods.

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01-01-2021
Business

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True or False: Japan generally runs a significant trade surplus because of low Japanese demand for foreign goods.

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Tundexi Tundexi · Answer 1 · 2021-01-02T20:06:48-05:00

It is false that Japan runs significant trade surplus because of its low demand for foreign goods.

Among the various reasons, Japan is a high country saving rate relative to investment that cause a significant trade surplus.

A higher saving rate generally corresponds to trade surplus and Japan socio-political and economical conditions reveals that people have a high propensity to save.

Other factor like high life expectancy rate, tax incentives for income and frequent environmental hazards contributed to the high rate of saving in Japan.

With the high rate of savings relative to domestic investment, Japan invest more funds in other countries (net capital outflow increases) and this is matched with high net exports leading to a trade surplus.

Therefore, It is false that Japan runs significant trade surplus because of its low demand for foreign goods.

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