By Harumi Taguchi, Principal Economist, IHS Global Insight
Key Points:
Ÿ Japan’s trade balance for January showed a deficit of JPY1.1 trillion (USD9.6 billion) on a non-seasonally adjusted basis, while the seasonally adjusted balance maintained a surplus of JPY156 billion, which is a decline of 52.5% from the previous month. The deficit factors in an 8.5% year-on-year (y/y) increase in imports after 24 consecutive months of decline, while growth for exports softened to 1.3% y/y from 5.4% y/y in the previous month.
Ÿ The large increase in imports was driven by an increase in mineral fuels, which contributed 5.0 percentage points to the y/y growth of imports, owing largely to higher prices of crude oil and coal.
Ÿ Solid increases in imports of clothing and accessories, nonferrous metals, and other groupings, also contributed.
Ÿ The softer increase in exports reflected a 0.3% y/y decline in export volumes, which was offset by a 1.6% increase in export prices, the first uptick after 14 consecutive months of decline.
Ÿ Exports to the US fell by 6.6% y/y, largely because of declines in exports in autos, while exports to Asia softened to a growth rate of 6.0% y/y, partially because the influence of its trade partners’ Lunar Year holidays.
Outlook:
Japan’s trade surplus with the US could continue to narrow from the increased imports of LNG (liquefied natural gas), which Japan has scheduled to import 8.5 million tons from the US every year from 2017 onwards. Although this will help narrow Japan’s trade surplus against the US, the surplus is expected to be a major topic after the high-profile meeting between President Donald Trump and Prime Minster Shinzo in the US, where they agreed to create a new framework for economic dialogue. Japan’s trade balance on a non-seasonally adjusted basis is likely to turn to a surplus, but this could be limited by higher commodity prices unless an uptrend in external demand continues.
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