Japanese Prime Minister Shinzo Abe - Photo by Kyodo News

JAKARTA (TheInsiderStories) – Japan’ trade balance turned to surplus of JPY17 billion (US$156.64 million) in October on a non-seasonally adjusted basis as imports declined faster (down 14.8 percent year on year) than exports (down 9.2 percent in annual basis). It was the first surplus in four months.

On a seasonally adjusted basis, however, the deficit persisted for the eighth consecutive month even though it narrowed by 46.0 percent from the previous month to JPY35 billion.

The accelerated decline in both exports and imports partially reflected relatively high year-earlier figures, declines in prices for oil and other commodities, and weak global demand. Exports declined faster largely because of the weak demand in the United States and European Union, in addition to continued sluggishness in exports to Asia.

Major contributors to the decline in exports were autos, auto parts, iron and steel products, power generating machines, and other ordinary machinery. The decline in imports of mineral fuels made a negative contribution of 5.5 percentage points to the overall imports.

While the decline in imports of manufactured goods and parts suggests weak production and de-stocking in response to sluggish demand, imports of consumer goods, such as clothing and accessories, declined as the front-loaded demand ahead of the consumption tax increase in October 2019 tapered off.

Looking the data, Harumi Taguchi, principal economist at IHS Markit, estimated that export volumes increased by 1.3 percent in October from the previous month. This signals that the downtrend of external demand eased to some degree, while a continued increase in exports of semiconductors hints at a recovery in the tech cycle.

It said, Japan’ exports are unlikely to increase significantly over the near term, given that global uncertainties have suppressed fixed investment and weakened consumer demand from Japan’s major trading partners.

Imports are also likely to remain soft, reflecting weak outlooks for prices of oil and other resources and a sluggish recovery in consumer spending following a drop after the tax increase. Even so, slack external demand could continue to weigh on Japan’s trade balance, and weak production could hurt fixed investment.

According to the Jibun Bank Japan Manufacturing Purchasing Managers Index survey by IHS Markit, the export orders index for October remained below 50 for the 11th  month, suggesting a continued decline in exports over the near term.

US$1: JPY108.53

Written by Staff Editor, Email: theinsiderstories@gmail.com