JP: Merchandise Trade

Tue Apr 19 18:50:00 CDT 2016

Consensus Actual Previous
Level Y834.6B Y755.0B Y242.8B
Exports-Y/Y -6.9% -6.8% -4.0%
Imports-Y/Y -16.2% -14.9% -14.2%

The stronger yen continued to take its toll on Japanese trade in March as the pace of contraction in imports and exports quickened from the previous month. However, at the same time, the country's trade surplus rose to its highest level in five-and-a-half years.

March unadjusted merchandise trade balance was in surplus for the second month. The surplus was Y754.985 billion, up from a revised Y242.164 billion in February. Exports dropped 6.8 percent from a year ago for their sixth straight drop while imports declined 14.9 percent for a fifteenth consecutive drop. From a year ago, exports to Asia were down 9.7 percent and to China exports were 7.1 percent lower. Exports to the U.S. dropped 5.1 percent. However, exports to the EU jumped 12.1 percent for a second consecutive increase.

On a seasonally adjusted basis, the trade surplus was Y276.511 billion, up from Y150.441 billion in February. On the month, exports edged up 0.1 percent but were down 9.7 percent from a year ago. Imports were down 2.1 percent from February and down 15.1 percent on the year.

It is quite possible that the earthquake last week in the southern prefecture of Kumamoto and aftershocks thereafter could disrupt the supply chains of a number of companies -particularly those in the semiconductor industry and affect trade in coming months.

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.