JP: Merchandise Trade

Tue Sep 19 18:50:00 CDT 2017

Consensus Actual Previous
Level Y101.3B Y113.6B Y418.8B
Exports-Y/Y 14.7% 18.1% 13.4%
Imports-Y/Y 11.7% 15.2% 16.3%

Japan's merchandise trade surplus narrowed from Y418.8 billion in July to Y113.6 billion in August, exceeding the consensus forecast of a surplus of Y101.3 billion. The value of Japan's exports increased 18.1 percent on the year in August, accelerating from 13.4 percent in July and above the consensus forecast of 14.7 percent. The value of Japan's imports advanced 15.2 percent on the year, down from 16.3 percent in July but still well above the consensus forecast of 11.7 percent.

Stronger headline exports growth in August was broad-based across Japan's major trading partners. Exports to the United States grew by 21.8 percent on the year, up from 11.5 percent in July, while year-on-year growth in exports to China and the European Union accelerated from 17.6 percent to 25.8 percent and from 8.3 percent to 13.7 percent respectively. Similar to Singapore trade data released earlier in the week, there was little to suggest in the Japanese data that there has been a significant impact on regional trade flows from the recent tensions between the North Korean regime and its neighbours. Japan's exports to South Korea grew by 17.1 percent on the year in August, up from 16.8 percent in July.

Weaker headline imports growth in August was partly driven slower year-on-year growth in imports of raw materials, manufactured goods, and electrical and other types of machinery. Iron ore imports, in particular, fell 12.1 percent on the year in volume terms, with year-on-year growth in their value slowing from 70.5 percent to 35.6 percent. This was partly offset by a stronger year-on-year increase in the value of petroleum imports, up from 7.7 percent to 9.1 percent. Motor vehicles imports also rebounded strongly, up 17.9 percent on the year in August after falling by 22.8 percent in July.

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.