November merchandise trade balance swung back into deficit as exports faltered. The deficit was narrower as the pace of imports was much slower than anticipated. The trade gap was Y379.7 billion, against expectations for a Y446.2 billion deficit. This comes after a Y108.3 billion surplus in October, which broke a six-month streak of deficits. Exports dropped 3.3 percent while imports retreated by 10.2 percent but was a slight improvement from the drop of 13.4 percent in October.
While the deficit is smaller than anticipated, the details aren't encouraging. Imports have now been contracting at more than 10 percent for three straight months and they have been down in every month of 2015. The drop in exports confirms that Japan is struggling despite a wide array of policy support measures and a weaker yen.
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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