JP: Merchandise Trade

Sun Mar 18 18:50:00 CDT 2018

Consensus Actual Previous Revised
Level Y-70.1B Y3.4B Y-943B Y-944.1B
Exports-Y/Y -1.4% 1.8% 12.2% 12.3%
Imports-Y/Y 17.4% 16.5% 7.9% 7.9%

Japan's merchandise trade balance swung to a small surplus of Y3.4 billion in February from a deficit of Y944.1 billion in January, above the consensus forecast for a deficit of Y70.1 billion. Japan typically records relatively large trade deficits in January. The value of Japan's exports increased 1.8 percent on the year in February, down from growth of 12.3 percent in January but above the consensus forecast for a fall of 1.4 percent. The value of Japan's imports advanced 16.5 percent on the year, up from 7.9 percent previously and falling short of the consensus forecast of 17.4 percent.

The fall headline year-on-year growth in Japan's exports in February was mainly driven by a drop in shipments to other countries in the region that observe lunar new year holidays, which took place in early February this year but in late January last year. Exports to China, Hong Kong and Taiwan fell 9.7 percent, 15.4 percent and 6.3 percent on the year respectively in February after increases of 30.8 percent, 11.7 percent and 9.8 percent respectively in January. There was also weaker growth in Japan's exports to the European Union and to trading partners in south-east Asia. though this was partly offset by an increase in year-on-year growth in exports to the United States from 1.2 percent to 4.3 percent.

The pick up in headline imports growth in February was largely driven by stronger growth in both the volume and value of iron and steel products, coal, and natural gas, with the value of food imports also growing at a faster pace. Imports of petroleum, autos, and iron ore, in contrast, recorded weaker year-on-year growth in value terms in February

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.