Japanese export values rebounded 9.8 percent on year to a record high in December, led by automobiles as largely expected (consensus was plus 9.0 percent), after marking their first drop in three months in November with a slight 0.2 percent dip, but demand for semiconductor-producing equipment remains sluggish amid slower global growth.

Import values fell for the ninth straight month as energy prices remained below year-earlier levels and demand for Covid drugs had waned but the pace of decrease decelerated to 6.8 percent from 11.9 percent. The median forecast was a 5.2 percent drop.

The trade balance recorded a surplus of ¥62.1 billion for the first positive figure in three months, coming in firmer than the median forecast of a deficit of ¥98.9 billion (forecasts ranged from a deficit of ¥205.6 billion to a surplus of ¥81.7 billion). It compared to a revised ¥780.35 billion deficit in November and a ¥1.50 billion shortfall a year earlier.

Shipments to China, one of the key export markets for Japanese goods, posted their first year-over-year increase in 13 months in December and reached the second highest on record. The world's second largest economy has been struggling to recover under the weight of property market problems. Japanese exports to the European Union rebounded after showing their first year-over-year drop in 33 months in November while exports to the U.S. remained strong, rising to a record high.

For the whole of 2023, Japanese exports posted the third straight annual increase, up 2.8 percent to a record high, following an 18.2 percent rise in 2022. By contrast, imports marked the first drop in three years, down 7.0 percent after surging 39.6 percent in the previously year. The trade balance recorded a deficit of ¥9.29 trillion for the third consecutive shortfall, but it narrowed to less than half of the ¥20.3 trillion deficit in 2022.

Econoday's Relative Performance Index stood at plus 7, just above zero, which indicates the Japanese economy is performing largely as expected. Excluding the impact of inflation, the RPI was at zero.

Japanese export values are forecast to rebound 9.0 percent on year in December, led by automobiles, after marking their first drop in three months in November with a slight 0.2 percent drop, but demand for semiconductor-producing equipment appears to remain sluggish. Import values are expected to fall for the ninth straight month on lower energy prices but the pace of decrease is seen slowing to 5.2 percent from 11.9 percent. The trade balance is forecast to record a third straight deficit but at a narrower ¥98.9 billion (some forecast a small surplus), compared to a revised ¥780.35 billion deficit in November and a ¥1.50 shortfall a year earlier.

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.