JP: Merchandise Trade

Sun Jun 18 18:50:00 CDT 2017

Consensus Actual Previous Revised
Level Y48.4B Y-203.4B Y481.7B Y481.1B
Exports-Y/Y 16.0% 14.9% 7.5%
Imports-Y/Y 14.8% 17.8% 15.1% 15.2%

Japan's merchandise trade balance shifted to a deficit of Y203.4 billion in May from a surplus of Y481.1 billion in April, in contrast to the consensus forecast of a surplus of Y48.4 billion. The value of Japan's exports increased 14.9 percent on the year in April, up from 7.5 percent in April but below the consensus forecast of 16.0 percent. The value of Japan's imports recorded growth of 17.8 percent on the year, up from 15.2 percent in April and above the consensus forecast of 14.8 percent.

Despite the move into deficit in May, today's data shows external demand is providing solid support to Japan's economy. Exports are now growing at their fastest pace since January 2015 with year-on-year growth in positive territory for the sixth month in a row. The pick-up in export growth in May was broad-based across Japan's major trading partners. Exports to China grew by 23.9 percent on the year in May, up from 14.8 percent in April and the seventh consecutive increase. Exports to Korea, Hong Kong and ASEAN countries also recorded stronger year-on-year increases in May, offset by a modest fall in exports to Taiwan on the year. Demand from outside the region also picked up appreciably, with exports to the United States up 11.6 percent on the year after growth of 2.6 percent in April, and the the year-on-year increase in exports to the European Union picking up from 2.2 percent to 19.8 percent.

Stronger headline imports growth in May was largely driven by imports of raw materials, up 25.7 percent on the year in May after an increase of 6.5 percent in April, with iron ore imports accounting for much of this increase. Fuel imports rose strongly on the year, up 41.5 percent, but moderated from the 58.7 percent increase recorded in April. Imports of manufactured goods, machinery and chemicals recorded stronger year-on-year growth in May, offsetting weaker growth in imports of electrical machinery and transport equipment.

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.