Imports and Exports Paradigm

Imports and Exports are the predominant vehicle to determine and drive market prices. A market price is specific to the exchange rate as the only driver to import and export lines. Remaining financial instrument levels and direction such as stock markets, Oil and commodities are dependent on the exchange rate but all are dependent on the position of Import and Export lines.

The predominant feature of Monetary Policy for all central banks is Price stability yet we live and breath for monetary successes and failures under a market economy and prices fluctuate under market economies. An appropriate market economy occurs when the exchange rate is correct to Import and export lines as GDP rises and Inflation drops.

The 3 main features to Import and export calculations for all central banks are Oil, GDP and Producer Prices. All represent prices factored to the exchange rate but none says price stability. Level of the exchange rate price determines if import and export lines are correctly positioned. The monthly release to imports and exports is the guiding feature to exchange rate balance or imbalances and to future GDP and Inflation releases.

Central banks release monthly Import and Export numbers but many central banks publish Import and Export numbers in the middle of the month. Japan and the BOJ release imports and exports on the 10th of every month while Australia and New Zealand publish on the 15th.

The secondary middle of the month view to Imports and exports reveals how vital is the release to central banks. More importantly is how difficult it is to find Import and Export information to calculations and methodologies.

The monthly and middle of the month releases informs how important is the position and location of Import and Export lines as moving averages or as moving parts.

The monthly Import and Export lines move slowly because Inflation, GDP, Economic releases move per month by 0.2 and 0.3 or 20% and 30%. Seen more specifically by decimals as 0.002 and 0.003. Exchange rates fail to move significantly under such low numbers especially when consensus estimates closely inform to the actual release.

No movements to exchange rates fails to move Import and Export lines and stifles ranges to stock markets, Oil and Commodities.

Why middle of month releases is due to Importers and Exporters and at what particular exchange rate was agreed for import and export shipments. This is where is seen the moving lines to

Note the Philipps Curve or the adverse relationship to Inflation and Unemployment. Unemployment and Wages was added to Export lines. As time progresses to further economic releases, more will add to Import and Export lines.

Import Lines = Inflation, Interest Rates, Exchange Rates, Producer Prices

Proper = Exchange rate should be dead center to Import and Export Lines. 

Export Lines = GDP, Money Supplies, Unemployment, Wages, Consumption,

The BOJ Example to Intervention

BOJ Intervenes on Trade Imbalances and current trade is not imbalanced. How are the Japanese to earn Profit to large sums spent on intervention. By adjusting Exchange Rates to Imports and Exports.

October 2022, Imports severely exceeded Exports to inform the exchange rate was to high at 151.00’s USD/JPY.

Exchange Rate at 151.00’s was here and above imports.

Import Lines = Inflation, Interest Rates, Exchange Rates,

Export Lines = GDP, Money Supplies, Producer Prices, Unemployment, Wages

BOJ Intervention

Total amount of foreign exchange intervention operations for the period from September 29, 2022 through October 27, 2022

¥ 6,349.9 billion

Total amount of foreign exchange intervention operations for the period from August 30, 2022 through September 28, 2022

¥ 2,838.2 billion

Import and Export Imbalances began in August 2022 and the BOJ began Intervention immediately.

USD/JPY dropped from 151.00’s on October 2022 to 127.00’s by January 2023. The yearly relationship to the Corporate Goods Price Index was 18 Exports Vs 42 Imports or a 28 point difference for August, September and October.

Both Imports and Exports began a deep dive per month and Exports exceeded imports by April 2023.

Inflation at October 2022 was 3.9, and dropped to 3.00’s from January 2023 to October 2023. Inflation dropped along with the Import Line.

True to form, Inflation dropped as the Import line dropped.

Producer Prices high for at 10.4 in September 2022 dropped to current 2.0 in September. Producer Prices as inserted on the Import Line.

GDP skyrocketed from October 2022 at 4233.54 to 2023 highs at 4409.74. The GDP on the Export Line rose.

Consumption by Japan skyrocketed from October 2022 to 2023 and Consumption will add to the Export Line .

Wages skyrocketed from October 2022 to 2023.

Balance sheets rose from October 2022 to 2023.

Corporate Profits and Fixed Investments also skyrocketed from October 2022 to 2023.

The Nikkei 225 rose from October 2022 at 25621.96 to June 2023 at 33772.89 or + 8150.93 points.

WTI Oil dropped in October 2022 from 80.87 to 63.70 by April 2023.

XAU/JPY October 2022 at 239984 jumped to 278983 by April 2023 when Exports Exceeded Imports.

JPY/XAU dropped along with USD/JPY from October 2022 to April 2023.

Current USD/JPY Vs Imports and Exports

Import Lines = Inflation, Interest Rates, Exchange Rates, Producer Prices

Proper = Exchange rate should be dead center to Import and Export Lines. 

Export Lines = GDP, Money Supplies, Unemployment, Wages

USD/JPY at current exchange rates balances to Imports and Exports and sits in its proper position as middle position to imports and Exports.

Intervention is not seen again until Imports exceed exports. This will take time as Import and Export lines travel slowly. This means the current USD/JPY level is acceptable to the BOJ and poses no threat.

The world of monetary Policy, and prices is seen in Import and Export Lines .

More economics and concepts will add to the Import and Export Paradigm as central bank review is complete.

Brian Twomey

Leave a Reply