JAKARTA (TheInsiderStories) – Japan’ trade surplus declined 32.6 percent year-on-year (YoY) to JPY529 billion (US$4 billion) in March on a non-seasonally adjusted basis, IHS Markit reported. The balance turned to a deficit of JPY178 billion from a surplus of JPY26 billion in February on a seasonally adjusted basis.

The annual weakness in the trade surplus reflected a continued decline in exports (down 2.4 percent YoY) despite a rebound in imports to a 1.1 percent YoY increased (from a 6.6 percent YoY drop in February) due largely to disruptions caused by the Lunar New Year holidays in Japan’s trade partners.

Although exports to the United States and the European Union increased at a faster pace relative to February figures, exports to Asia declined by 5.5 percent YoY, largely because of a contraction in exports to China (a 9.4 percent YoY drop, or 15.2 percent drop in volume terms).

While sluggish exports to Asia were due largely to contractions in exports of semiconductors, semiconductor production machinery, scientific optical instruments, and iron and steel products, exports of motor vehicle parts drove declines in all major regions.

On the other hand, the rebound in imports was thanks largely to the increase in imports of aircraft and liquid natural gas (LNG), and rebounds in imports of iron and steel products, clothing and accessories and other products.

Harumi Taguchi, principal economist at IHS Markit rated the improvement in imports partially reflected higher industrial production and demand for machinery in addition to the drop-out of impacts from the Lunar New Year holidays in Japan’ trade partners.

That said, the sluggish exports were due to continued repercussions from the US-China trade tension and global weak demand for mobile phones (notably for iPhones), which could continue to weigh on Japan’s exports over the near term.

Together with persistent weak demand, stronger prices of oil and other commodities could lead Japan’ trade balance to turn negative temporarily. While the first US-Japan trade talks, held on 16 April, presented no surprises, the talks are expected to end up increasing Japan’s imports from the US (particularly of agricultural products, oil products and LNG, and military goods) and declining exports to the US (mainly of autos). This will likely suppress Japan’ trade surplus.

by Linda Silaen, Email: linda.silaen@theinsiderstories.com