Japanese export values posted a second straight year-on-year rise in November, up 3.8% (vs. consensus +2.4%), after rising 3.1% in October, led by solid demand for semiconductor-producing equipment, non-ferrous metals and food. Shipments of automobiles, iron/steel and construction/mining machines dropped amid slowing global growth. Export and import volumes both recorded their first fall in two months, indicating a soft start to Q4 economic growth.

Import values unexpectedly marked their first decalin in eight months, down 3.8% (vs. consensus +1.0%), after a slight 0.4% gain in October. The decrease was due to lower imports of crude oil, semiconductors and coal in that order, which offset higher purchases of smartphones and computers.

The trade balance posted a deficit of ¥117.6 billion (vs. consensus ¥697.0 billion in deficit) for a fifth consecutive shortfall, narrowing sharply from a revised ¥462.13 billion deficit in October and the ¥813.87 billion deficit in November 2023 and the record shortfall of ¥3,506.43 billion (¥3.51 trillion) in January 2023.

Shipments to China, a key export market for Japanese goods, rose 4.1% on year in November, after rising 1.4% in October and marking their first fall in 10 months with a 7.3% slump in September. The increase reflects a pickup in demand for non-ferrous metals, organic compounds (cosmetics, etc.) and semiconductors. Auto shipments were down.

Exports to the United States, which is still the largest market for Japanese exports, dipped 8.0% after a 6.2% fall, marking their fourth straight drop in light of resilient but cooling U.S. economic growth and reflecting lower demand for automobiles, drugs and construction/mining machines as largely seen in the previous month. Shipments to the U.S. recorded their first year-on-year decline in 35 months in August (-0.7%) and have since shown a larger drop every month. Japanese exports to the European Union slumped 12.5% for the eighth straight fall after an 11.3% dip amid sluggish demand for automobiles, ships and iron/steel.

Japanese export values are forecast to post a second straight year-on-year rise in November, up a modest 2.4%, after rising 3.1% in October, led by solid demand for semiconductor-producing equipment, food and raw materials. Shipments of automobiles, steel and drugs are expected to show declines amid slowing global growth.

Import values are expected to mark their eighth straight increase, up 1.0% after a slight 0.4% gain in October, reflecting demand for smartphones, computers and non-ferrous metals. Imports of crude oil and semiconductors are seen down on year.

The trade balance is forecast to post a deficit of ¥697.0 billion for a fifth consecutive shortfall, widening from a revised ¥462.13 billion in deficit in October but narrower than the ¥813.87 billion deficit in November 2023 and the record shortfall of ¥3,506.43 billion (¥3.51 trillion) 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.