July merchandise trade deficit expanded to Y268.1 billion analysts were expecting a deficit of only Y33.5 billion. July's deficit widened from Y70.5 billion in June. This was the fourth consecutive monthly deficit.
Exports were up 7.6 percent on the year after increasing 9.5 percent last time. They were however, up for the eleventh straight month while imports slumped 3.2 percent for the seventh straight drop. Exports to Asia and China were up for a fifth consecutive month. The former was up 6.1 percent on the year while the latter added 4.2 percent. Exports to the EU, up for the eighth straight month, gained 10.0 percent. Exports to the U.S. jumped 18.8 percent. It was the eleventh consecutive increase.
On a seasonally adjusted basis, the trade deficit widened to Y368.8 billion from Y283.4 billion. A weaker yen is helping exports keep up their winning streak, despite merchandise volumes being lower than a year ago. Merchandise export volumes were down 0.7 per cent from a year ago, versus a flat reading from June.
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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