JP: Merchandise Trade

Tue Jun 16 18:50:00 CDT 2015

Consensus Actual Previous
Level Y-233.7B Y-216.0B Y-53.4B
Exports-Y/Y 3.5% 2.4% 8.0%
Imports-Y/Y -7.5% -8.7% -4.2%

Japanese trade figures for May disappointed, as weakness in the yen did little to boost exports. Japan's merchandise trade deficit expanded to Y216.0 billion from Y55.8 in April. Exports were up a weak 2.4 percent from the same month a year ago while imports dropped 8.7 percent or more than double the 4.2 percent pace in April. The decline of the yen makes imports more expensive. However, it also reflected weaker consumption. The decline in petroleum prices also dented imports. Exports to the U.S. were up 7.4 percent on the year for the seventh consecutive rise. However, this followed a jump of 21.3 percent in April. Exports to China were up 1.1 percent for the third consecutive increase but down from 2.4 percent the month before. Exports to the EU were up 0.4 percent for the sixth increase after 0.8 percent.

On a seasonally adjusted basis, the trade deficit was Y182.5 billion after a deficit of Y240 billion in April. On the month, exports were down 2.7 percent and imports lost 3.5 percent.

In April, when the exchange rate averaged Y119.6 per dollar, exports increased 8 percent. Although the exchange rate fell to Y124 per dollar by late May, the deterioration didn't seem to have helped much.

Merchandise trade balance measures the difference between imports and exports of both tangible goods and services. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade.

Japan's merchandise trade balance measures visible trade and excludes services. Specifically it is the difference between imports of goods and exports of goods. A positive value indicates a trade surplus (exports exceed imports) while a negative value indicates a trade deficit (imports exceed exports). Movements in the trade balance reflect altered demand for Japanese exports which subsequently impact the yen's value and directly affect GDP growth because of the economy's dependence on trade.

The report gives insight into changing trends regarding Japanese trade. Such developments are especially important for Japan, which is an export-oriented economy that has historically experienced large trade surpluses and any change can have a dramatic effect on the domestic economy. Typically the headline number is the change from the previous year in yen along with the percentage change in exports and in imports from the previous year.