JP: Merchandise Trade

November 20, 2016 05:50 CST

Consensus Actual Previous
Level Y615B Y496B Y498.3B
Exports-Y/Y -8.6% -10.3% -6.9%
Imports-Y/Y -16.3% -16.5% -16.3%

Japan recorded a merchandise trade surplus of Y496.2 in October, little changed from the surplus of Y498 billion in September but smaller than the consensus forecast for a surplus of Y615.4 billion.

The smaller-than-expected trade surplus in October mainly reflects weaker-than-expected export performance. Exports fell by 10.3 percent year-on-year in October, compared with the consensus forecast for a fall of 8.6 percent. This was the thirteenth consecutive month of negative year-on-year growth in Japanese exports, reflecting weak external demand in most major markets. Japan's exports to Asia fell 9.9 percent year-on-year in October, including a drop of 9.2 percent in exports to China, while exports to the United States and the European Union fell 11.2 percent and 9.5 percent respectively.

Japan's exports of cars increased by 1.9 percent in volume terms in October, but lower unit prices in yen terms meant that the value of these exports fell by 9.1 percent year-on-year. Exports of semi-conductors also recorded larger volumes but lower values year-on-year.

Imports were broadly in line with expectations, falling by 16.5 percent year-on-year compared with the consensus forecast for a fall of 16.3 percent. Imports have now fallen in year-on-year terms for twenty-two consecutive months, mainly reflecting the impact of lower global oil prices. Japanese imports of petroleum fell by 9.5 percent year-on-year in volume terms in October, with the value of these imports falling by 27.2 percent.

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.