JP: Merchandise Trade

Sun Feb 18 17:50:00 CST 2018

Consensus Actual Previous
Level Y-1064B Y-943B Y359B
Exports-Y/Y 9.4% 12.2% 9.3%
Imports-Y/Y 8.4% 7.9% 14.9%

Japan's merchandise trade balance swung to a deficit of Y943 in January from a surplus of Y359 billion in December, above the consensus forecast for a deficit of Y1,064 billion. Japan typically records relatively large trade deficits in January. The value of Japan's exports increased 12.2 percent on the year in January, up from growth of 9.3 percent in December and above the consensus forecast of 9.4 percent. The value of Japan's imports advanced 7.9 percent on the year, slowing from 14.9 percent previously and falling short of the consensus forecast of 8.4 percent.

The increase in headline exports growth in January reflects stronger external demand from most of Japan's major trading partners with the exception of the United States. Exports to China advanced 30.8 percent on the year in January, up strongly from 15.9 percent in December, while stronger year-on-year growth was also recorded for other regional export destinations, including Hong Kong, Korea, Taiwan and Singapore. Japan's exports to the European Union also picked up from year-on-year growth of 11.4 percent in December to 20.3 percent in January. This was party offset by a moderation in year-on-year growth of exports to the United States from 3.0 percent to 1.2 percent.

Weaker headline imports growth in January was largely driven by weaker growth in both the volume and value of Japan's petroleum imports. The volume of these imports fell 4.6 percent on the year in January after a decline of 3.0 percent in December, while year-on-year growth in their value slowed from 28.8 percent to 11.4 percent. Iron ore imports also recorded weaker growth in both volumes and values in January. Other major categories of imports - including manufactured goods, machinery, electrical machinery and motor vehicles - recorded weaker growth in their value, offset by somewhat stronger growth in imports of foodstuffs, raw materials, and chemicals.

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.