Skyrocketing Marine Freight Rates and Japan’s Sinking Buying Power

 

Hello, I’m Ichiki of Sync Logistics.

In this issue, I’d like to share my thoughts on the current problem of skyrocketing marine freight rates and Japan’s sinking buying power.

 

■Shortage of containers for Japan due to sinking buying power

As marine freight rates for containers skyrocket globally, freight rates also continue to rise within Asia. Generally speaking, marine freight rates fluctuate based on global supply and demand. Naturally, shipping companies prioritize shippers who buy a lot of container space at a high price to make sure that containers are consistently filled to capacity. In light of the current container shortage, I believe it is crucial for all stakeholders involved in trade to understand and prioritize their interests when providing services.

In terms of marine freight rates, unfortunately Japan often loses out to nearby countries such as China, South Korea, and Russia. Most marine freight rates are denominated in US dollars, and while I believe a weak yen is also a factor, if the reluctance to buy container space due to skyrocketing freight rates continues, shipping volume will decrease, leading to Japan being prioritized less as a port of call for container ships. In reality, the number of port calls to Japan on key shipping routes operated by major shipping companies has been declining annually and has halved since I began working in this industry 12 years ago.

 

■No growth in exports despite a weak yen

In addition, another factor that makes it hard for container ships to stop at Japanese ports is decreasing import volumes due to a weak yen. If there are many import containers bound for Japan, the operating capacity of container ships can be increased by loading export cargo into such import containers after they are emptied, but with a weak yen and the volume of import containers decreasing, there is likely to be a shortage of empty containers for goods for export. When this happens, empty containers must be forwarded from other countries, and the cost of forwarding will be added to marine freight rates for exports from Japan.

In this light, I believe we must increase export volumes from Japan. The yen’s depreciation is at a historical low, and there is still much room for growth in export volumes. While it won’t be surprising if export volumes double compared to 10 years ago when the exchange rate was 80 yen to the dollar, actual export volume growth has not been that big.

■What to prioritize: cost or securing space?

Increased export volumes contribute to a stronger yen, and as a result, they also have a positive impact on imports. Even though there is a shortage of containers globally, I believe Japan can secure global container space without losing to other countries if we export truly valuable goods and services.

This is why I’d like to see exporters grow even more. Instead of taking a passive stance that “we’re lucky the yen is weak,” I hope exports largely grow to the point that we should aim to increase export volumes significantly enough to influence a stronger yen. I believe having this proactive approach will lead to a virtuous cycle wherein many goods flow through both imports and exports.

Furthermore, what is required of forwarders is a mindset of competing based on global standards. Aside from being aware of our operations’ efficiency and utilization rates, it is important for us to figure out how to fully optimize the entire shipping process as a whole. Our competitors for container space are countries like China which has more than ten times our population, pays high marine freight rates, and prioritizes securing container space.

To maximize export volumes during this opportune time of yen depreciation, I believe we have to understand the structure of global competition, and focus our efforts on having a mindset of buying container space at market rates and creating a system for the stable export of a fixed amount of goods. 

Since our company’s establishment, our consistent message to our clients has been to “export as many vehicles as possible.” Once again, we go back to our roots as we strive to create services for our customers.

 

Thank you for your time.