Japanese export values rose 5.4 percent for the seventh straight year-over-year increase in June, led by solid demand for semiconductor-making equipment, non-ferrous metals and plastics, but the pace of increase slowed from 13.5 percent in May and export volumes marked the fifth consecutive drop as the effects of the past rate hikes by major central banks weighed on global growth. The pace of export growth came in below the consensus forecast of a 6.1 percent gain.

Import values rose 3.2 percent in June (consensus was a 6.4 percent rise) for the third straight increase after rising 9.5 percent in May and rebounding 8.4 percent in April. The increase was led by strong demand for computers, engines and telecommunications equipment (smartphones). Purchases of coal remained below year-earlier levels.

The trade balance recorded a ¥224.0 billion surplus, coming in stronger than the median forecast of a ¥142.3 billion deficit and close to the top end of the forecasts that ranged from a deficit of ¥340.0 billion to a surplus of ¥244.4 billion. It followed a revised ¥1,220.1 billion (¥1.22 trillion) deficit in May and compared with a ¥36.5 billion surplus in June 2023 and a record shortfall of ¥3,506.43 billion (¥3.51 trillion) hit in January 2023.

Shipments to China, a key export market for Japanese goods, posted their seventh straight increase thanks to recovering demand for chip-making equipment and non-ferrous metals amid a gradual pickup in the world's second-largest economy. Japanese exports to the European Union fell on year for the third straight month, hit by lower demand for automobiles and steel as seen in the prior month. Exports to the US remain robust, up for the 33rd straight month on autos and auto parts, after hitting a record high in December 2023.

Econoday's Relative Performance Index (RPI) stands at minus 3, just below zero, which indicates the Japanese economy is performing largely as expected after underperforming slightly. Excluding the impact of inflation, the RPI is at minus 2.

Japan's economy marked the first slump in two quarters in January-March, down 2.9 percent annualized, after it narrowly averted a second straight contraction in the final quarter of 2023. Looking ahead, the economy in April-June is expected to show modest growth of about 2 percent annualized as auto production resumed in March but more revelations of false safety test records in June, this time at Toyota Motor itself, instead of its subsidiaries, may have slowed overall output. Consumer spending remains sluggish amid elevated costs for food and energy while the outlook for exports remains uncertain.

Japanese export values are forecast to rise 6.1 percent for a seventh straight year-over-year increase in June, led by continued solid demand for semiconductors and chip-making equipment, but the pace of increase is seen slowing from 13.5 percent in May and 8.3 percent in April as the effects of the past rate hikes by major central banks weigh on global growth. Import values are expected to rise 6.4 percent for a third straight rise, led by computers and crude oil, following higher increases of 9.5 percent in May and 8.3 percent in April. The weak yen is pushing up import costs.

The trade balance is forecast to show a ¥142.3 billion deficit, with economist forecasts ranging widely from a deficit of ¥340.0 billion to a surplus of ¥244.4 billion. It would be a third straight monthly deficit after a revised ¥1,220.1 billion (¥1.22 trillion) deficit in May and compare with a ¥36.5 billion surplus in June 2023 and a record shortfall of ¥3,506.43 billion (¥3.51 trillion) hit in January 2023.

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.