JP: Merchandise Trade


Tue Mar 21 18:50:00 CDT 2017

Consensus Actual Previous
Level Y983.4B Y813.4B Y-1087B
Exports-Y/Y 10.7% 11.3% 1.3%
Imports-Y/Y 0.5% 1.2% 8.5%

Highlights
Provisional data show Japan recorded a merchandise trade surplus of Y834 billion in February, falling short of the consensus forecast of Y983.4 billion but still a big turnaround from the deficit of Y1087.6 recorded in January. This volatility in the trade balance for the first two months of the year partly reflects the impact on regional trade flows of lunar new year holidays, which took place in early February this year. Adding the trade balance for January and February together gives a trade deficit of Y273.5 billion for the first two months of 2017 compared with a combined trade deficit of Y412.2 for the first two months of 2016.

The value of Japan's exports rose 11.3 percent on the year in February, up from a holiday-impacted increase of 1.3 percent in January and somewhat above the consensus forecast of 10.7 percent. Combining January and February data, exports for the year-to-date rose 6.5 percent compared with the same two months in 2016, up from a year-on-year increase of 5.4 percent recorded in December last year.

The value of Japan's imports rose 1.2 percent on the year, down from 8.5 percent in January but above the consensus forecast of 0.5 percent. Combining January and February data, imports for the year-to-date rose 5.0 percent compared with the same two months in 2016, up from a year-on-year decline of 2.5 percent recorded in December last year.

Abstracting from the impact that the lunar new holidays have on the distribution of trade flows in the first two months of the year, today's report shows that growth in both exports and imports has strengthened since the end of 2016. This is line with PMI data released at the start of the month which showed new export orders grew at their fastest pace in over three years in February. Officials at the Bank of Japan have also highlighted recent improvements in external demand as a factor supporting an upward revision to their growth forecasts.

Definition
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.

Description
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.