JP: Merchandise Trade

Wed Jul 19 18:50:00 CDT 2017

Consensus Actual Previous
Level Y488.0B Y439.9B Y-203.4B
Exports-Y/Y 9.0% 9.7% 14.9%
Imports-Y/Y 14.4% 15.5% 17.8%

Japan's merchandise trade balance shifted from a deficit of Y203.4 billion in May to a surplus of Y439.9 billion in June, a little below the consensus forecast of a surplus of Y488.0 billion. The value of Japan's exports increased 9.7 percent on the year in June, down from 14.9 percent in May but above the consensus forecast of 9.0 percent. The value of Japan's imports recorded growth of 15.5 percent on the year, down from 17.8 percent in May and above the consensus forecast of 14.4 percent.

Although slowing relative to the pace set in May, year-on-year growth in exports remained solid in June and in positive territory for the seventh consecutive month. Japan's exports to China grew by 19.5 percent on the year in June, down from 23.8 percent in May, with stronger growth in exports to Taiwan and Korea offset by somewhat slower (but still solid) growth in exports to Hong Kong and ASEAN countries. Growth in exports to the United States slowed from 11.6 percent in May to 7.1 percent in June, with growth in exports to the European Union decelerating from 19.8 percent to 9.6 percent.

The moderation in headline imports growth in June was largely driven by imports of petroleum, up just 3.1 percent on the year (in value terms) after increasing by 17.0 percent in May. The volume of these imports fell by 12.5 percent on the year. The value of imports of raw materials also rose at a slightly weaker pace of 24.1 percent in June compared with 25.7 percent growth in May, with imports of motor vehicles and electrical machinery also posting slower growth. Other categories of imports, however, recorded stronger year-on-year growth in June including machinery, coal, and aircraft, with growth in imports of iron ore and manufactured goods steady.

On a seasonally adjusted basis, exports fell 0.3 percent on the month in June while imports rose 0.4 percent.

Today's data suggests that external demand has made a positive contribution to Japanese economic growth in the three months to June. Preliminary GDP data for this quarter are scheduled for release mid-August.

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.