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Weak demand and rising yen weighs on Japan’s exports


By Harumi Taguchi, Principal Economist, IHS Global Insight

Key Points:

  • Japan’s trade surplus increased in June by 13.7% from the previous month to JPY335 billion (USD3 billion) on seasonally adjusted basis.
  • The trade balance also turned a surplus of JPY692 billion on non-seasonal adjusted basis, reflecting month-to-month (m/m) growth for exports (1.3%) which narrowed the year-on-year (y/y) declines for exports (-7.4%), while modest m/m growth of imports (0.6%) resulted in steeper y/y declines(-18.8%).
  • Weak y/y growth for exports was due largely to declines in export prices, due to a rising yen, which was partially offset by increase in export volumes.
  • While exports to Asia, the US and the European Union (EU) continued to fall, growth for export volumes to these markets turned positive, particularly for the US (2.9% y/y) for the first increase since April 2014.
  • The declines for imports were largely driven by weak commodity prices and yen strengthening, which widened declines for import prices, while import volume grew marginally at 0.4% y/y.
  • Although mineral fuels remain a major contributor, the weakness of imports also reflected declines for airplanes, computers, semiconductors and other products, suggesting sluggish demand and waning import substitution for some products caused by the Kumamoto Earthquake.


Japan’s trade balance is likely to remain in surplus over the near term and that any improvement will probably be limited, unless external demand picks up. The improvement for exports partially reflected waning disruption caused by the Kumamoto Earthquake, as well as yen strengthening and uncertainties about the influence of Brexit on exports. The y/y effect from weak oil prices are likely to gradually soften and lift overall import prices, but this could be partially offset by weak domestic demand and the effect from yen strength.

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Source: The Insiderstories
Weak demand and rising yen weighs on Japan’s exports

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