JP: Merchandise Trade

April 19, 2017 06:50 CDT

Consensus Actual Previous
Level Y614.4B Y614.7B Y813.4B
Exports-Y/Y 6.6% 12.0% 11.3%
Imports-Y/Y 11.5% 15.8% 1.2%

Japan's merchandise trade surplus narrowed to Y614.7 billion in March from Y813.4 billion in February, matching the consensus forecast of Y614.4 billion. The value of Japan's exports increased 12.0 percent on the year in March, up from 11.3 percent in February and 6.5 percent for January and February combined and well above the consensus forecast of 6.6 percent. The value of Japan's imports recorded growth of 15.8 percent on the year, up strongly from 1.2 percent in February and 5.0 percent for January and February combined and also beating the consensus forecast of 11.5 percent.

Exports to most of Japan's major Asian trading partners showed strong growth on the year in March. Exports to China grew by 16.4 percent, the fifth consecutive year-on-year increase, with exports to Korea and Taiwan up 29.0 percent and 12.0 percent respectively. Demand was more subdued but still positive elsewhere, with exports to the United States up 3.5 percent on the year and those to the European Union advancing 1.4 percent.

Higher global oil prices were the main factor driving the acceleration in headline import growth in March. Although the volume of Japan's imports of petroleum fell 16.8 percent on the year, their value soared 45.7 percent. Higher prices for metals, iron and steel, coal and liquid petroleum gas imports also contributed to the stronger headline growth.

Today's data shows somewhat stronger trade flows in March, with the values of exports to and imports from other regional economies in particular showing solid growth. The recent escalation in tensions with the North Korean regime, however, may present a downside risk to regional trade flows in the near-term.

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.