JP: Merchandise Trade

January 24, 2017 05:50 CST

Consensus Actual Previous
Level Y270B Y641.4B Y152.5B
Exports-Y/Y 1.2% 5.4% -0.4%
Imports-Y/Y -0.8% -2.6% -8.8%

Japan recorded a merchandise trade surplus of Y641.4 billion in December, up strongly from a surplus of Y152.5 billion in November, and well above the consensus forecast for a surplus of Y270 billion. This is the largest monthly trade surplus since June 2016.

The larger-than-expected surplus in December was driven by both stronger-than-expected exports and weaker-than-expected imports. Exports rose 5.4 percent year-on-year in December, after falling by 0.4 percent in November, compared with the consensus forecast of 1.2 percent. This is the first year-on-year increase in Japanese exports in 15 months and suggests that the depreciation in the domestic currency following the United States presidential election has provided a boost to external demand.

Japan's exports to the United States rose 1.3 percent year-on-year in December, the first increase in ten months, while exports to Asia rose 12.0 percent, including a 12.5 percent increase in exports to China. Exports to the European Union, however, fell for the third consecutive month, down 4.0 percent year-on-year in December. Exports of machinery and electrical machinery made the biggest contributions to the increase in total exports in December, offsetting a small fall in exports of manufactured goods and transport equipment.

Japan's imports fell 2.6 percent after a sharp drop of 8.8 percent the previous month, more than the consensus forecast for a fall of 0.8 percent. Imports have now fallen in year-on-year terms for twenty-four consecutive months, mainly reflecting the impact of lower global oil prices. The value of Japanese imports of mineral fuels (including petroleum, natural gas and coal) fell by 4.8 percent year-on-year in December.

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.