By Harumi Taguchi, Principal Economist, IHS Global Insight
Key Points:
· Japan’s trade surplus increased by 83.8% to JPY277 billion (USD2.5 billion) in March compared to the previous month, on a seasonally adjusted basis. The trade surplus also rose to JPY755 billion on a non-seasonally adjusted basis.
· The trade surplus largely reflected a steeper decline in imports (-14.9% year on year (y/y)) than in exports (-6.8% y/y). The decline in exports is largely reflected weaker export prices due to the stronger yen, while export volumes fell 1.0% y/y.
· Although increases in exports of ships and autos partially offset the weakness in exports, continued declines in exports of iron and steel, a broad range of machinery and semiconductors suggest persistent sluggishness in production and investment in trade partners.
· Increases in imports of food products, clothing and accessories, and some other products contributed to a lift in import volume by 5.2% y/y. This was offset by weaker import prices due large to low prices for oil and other resources, and the stronger yen.
IHS Global Insight Views:
Although the export trend improved somewhat, weak demand and the strengthening yen are likely suppress a recovery in exports over the near term. Plant shutdowns due to the aftershocks of the Kumamoto earthquake could also weigh on exports over the near term. Japan’s trade balance showed improvement and a narrow surplus is expected to continue over the near term thanks to low prices of oil and other resources. That said, the negative effect of the stronger yen on exports (at first on prices but later on volumes, if persists) could limit further improvement and weak demand remains a concern.