June merchandise trade deficit was Y69.0 billion. Analysts expected a surplus of Y45.8 billion. Exports were up slightly less than expected 9.5 percent while imports dropped less than expected 2.9 percent. It was the tenth consecutive increase for exports and sixth consecutive drop for imports. The decline in the value of the yen makes imports more expensive. However, it also reflects weaker consumption. The decline in petroleum prices also dented imports.
Exports to Asia were up 10.1 percent on the year while those to China were 5.9 percent higher. Exports to the European Union added 10.8 percent. It was the seventh consecutive increase. Exports to the U.S. climbed for the tenth straight month, this time by 17.6 percent.
On a seasonally adjusted basis, the trade deficit was Y251.7 billion. Exports were up 4.4 percent on the month while imports jumped 5.8 percent.
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.
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