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6 Jul 2022

Econ Digest

Thai imports have been bolstered by the Yen’s depreciation, especially intermediate goods and goods, which benefit Thai consumers


        Japan’s currency has weakened steadily, hitting a 24-year low of JPY136.24 per USD (as of June 22, 2022), a decline of roughly 17.1% from the figure reported in early 2022. The Yen has been the worst performing major currency among its peers. It also shows growing signs of softening during the remainder of 2022. It is expected that the Yen’s depreciation will cause Japan to import at higher costs in 2022, and this will directly affect its trading partners, including Thailand. KResearch views that when compared to other Asian countries, such impact on Thailand will be limited, thanks to Thailand’s advantage in terms of its trade structure. For this reason, Japan has to import more than 80% of consumer goods and intermediate products from Thailand, while luxury goods for which consumers may defer their purchases account for only around 20% of Japan’s total imports from Thailand.  
        Meanwhile, Thailand’s imports from Japan have been at lower costs due to the Yen’s depreciation. Thai entrepreneurs can purchase raw materials and capital goods from Japan at lower prices. Japan is Thailand’s second largest import source, amounting to 11.7% of Thailand’s total imports. Major imports include intermediate goods such as chemicals, machinery, electrical machines, electronic circuit boards, steel and steel products, auto parts, medical equipment, plastic products, diodes, printed circuit boards, and motorcycle parts. Other imports benefiting Thai consumers include passenger cars, watches, cosmetics, office equipment and cameras.
        Given this, KResearch views the direct impact of the Yen’s depreciation on Thai exports will likely be limited during 2022. Thailand has lost an opportunity to export to Japan by USD500-800 million so far this year. As a result, Thai exports to Japan during the remainder of this year may decline. Additionally, due to the high base of last year, Thai exports to Japan throughout 2022 may see a 0.6-percent contraction, with an export value of USD 24.8 billion (based on a forecast range of 3.0-percent contraction to 0.6-percent growth, with export value of USD 24.2-25.1 billion). Meanwhile, Thai imports have indirectly benefited from Japan’s intermediate goods for which prices are decreasing. However, due to the very high base in 2021, Thai imports throughout 2022 may rise only 0.4 percent to USD 35.8 billion. By the net total, Thailand still sustains a trade deficit of USD10 billion with Japan. However, such impacts may depend on the currency used for trade settlement between Thailand and Japan; approximately half of import-export payments are made using the US dollar.

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