JP: Merchandise Trade

Sun Dec 18 17:50:00 CST 2016

Consensus Actual Previous
Level Y227B Y152.5B Y496B
Exports-Y/Y -2.0% -0.4% -10.3%
Imports-Y/Y -12.6% -8.8% -16.5%

Japan recorded a merchandise trade surplus of Y152.5 billion in November, down from the surplus of Y496 billion in October and below the consensus forecast for a surplus of Y227 billion.

This smaller-than-expected surplus was mainly driven by a smaller-than-expected year-on-year fall in imports. After falling by 16.5 percent in October, Japanese imports fell by 8.8 percent in November compared with the consensus forecast of a fall of 12.6 percent. Japan's exports also fell by less than anticipated, down 0.4 percent year-on-year in November compared with the consensus forecast for a fall of 2.0 percent and the fall of 10.3 percent recorded in October.

The improvement in exports year-on-year growth was reflected in most major trading partners. Exports to China, in particular, strengthened notably, up from a fall of 9.2 percent year-on-year in October to an increase of 4.4 percent in November, the first year-on-year increase in nine months. Exports to Asia more broadly rose from minus 9.2 percent to 3.4 percent, the first year-on-year increase in 15 months. Exports to both the United States and the European Union fell year-on-year in November, by 1.8 percent and 2.2 percent respectively, but these smalls were both smaller than those recorded in October of 11.2 percent and 9.5 percent respectively.

These stronger export numbers suggest that Japanese external demand may be starting to get some support from the recent depreciation of the yen. In line with other regional currencies, the yen has weakened significantly against the dollar since the United States presidential election in early November and in response to anticipation of a faster pace of policy normalisation by the Federal Reserve.

Today's data are consistent with recent PMI surveys and industrial production data showing some improvement in conditions in Japan's manufacturing sector in the last few months. This may support the view of officials at the Bank of Japan that the outlook for the economy has strengthened ahead of their policy meeting starting Monday. The consensus forecast is for no change in policy settings when officials announce their decision Tuesday local time.

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.