By: Pedro Santiago – Forex Focus
Imports slow down month-on-month as trade balance jumps to surplus.
Japan’s international-trade balance jumped to a whopping ¥139.56-billion surplus in September, after registering two successive months of deficits. The trade numbers came in better than Street expectations of a ¥50-billion deficit but narrowed considerably from the ¥654-billion surplus recorded during the same time last year. The country registered a sharp 7-percent increase in imports of goods over the same time last year, which was, however, way below the 15.3-percent growth seen in August 2018 and almost half of market expectations of a 13.7-percent rise in September. Meanwhile, exports unexpectedly slipped by 1.2 percent after registering gains of 6.6 percent in August and missing market consensus of a 1.9-percent rise.
Japan’s trade balance data is announced monthly and published by the Ministry of Finance. Japan’s trade balance has averaged ¥644.86 billion from January 1978 to September 2018. The country’s surplus peaked at ¥1,608.68 billion in September 2007 with the lowest deficit coming in at ¥2,795.12 billion in January 2014.
Following are some of the key highlights of the Japanese international trade numbers for September:
Imports rose 7 percent year-on-year to ¥6.59 trillion in September, slower than the 15.3-percent rise in August, largely led by a 42.1-percent surge in mineral fuels.
Petroleum, liquefied natural gas andcoal were the main contributors to the solid rise in mineral-fuel imports.
Imports of electrical machinery were up 0.7 percent on the back of a 14.7-percent rise in the purchases of telephone and telegraph machinery.
The country registered a marginal rise in the imports of machinery, while purchases of organic chemicals swelled by 25.5 percent.
Imports of manufactured goods, such as iron and steel products along with non-ferrous metals, grew by 2.8 percent.
Declines in import orders of 5.8 and 2.1 percent were seen in scientific and optical instruments and transport equipment respectively.
The key importing countries in terms of percentage of imports were led by Australia (30.5), South Korea (8.8), China (4.2) and the United States (3.1). Imports from the Middle East rose 35.4 percent, led by the United Arab Emirates with 47 percent and Saudi Arabia with 26.7 percent. On the contrary, imports declined from Thailand, Malaysia, Taiwan, Indonesia and Western European countries, such as Germany and Italy.
On the export front:
The country saw a 1.2-percent drop in September’s export numbers. Exports slipped to ¥6.73 trillion, registering the first monthly decline in 22 months on the back of a series of natural disasters in the country, with the ongoing US trade war also lending some amount of uncertainty.
Exports of transport equipment dropped 2.1 percent, mainly due to a 4.7-percent fall in the sales of motor vehicles.
Exports of electrical machinery and manufactured goods also fell by more than 2 percent.
Gainers included other machinery and chemicals.
Sales of goods to other countries declined across the board, led by a 10.8-percent drop in exports to the United Kingdom, 8.1 percent to Australia, 9.4 percent to Western Europe and 5.3 percent to the Middle East.
Japan is the fourth largest exporter in the world, with the country having shipped close to $700 billion worth of goods in 2017, contributing about 4.4 percent of global exports. Region-wise, Asia contributes about 58 percent of the country’s total exports, North America almost 22 percent and Europe around 13 percent. The United States and China are the two largest export markets for Asia’s second-largest economy, with the countries together purchasing about 40 percent of total exports.
According to the International Monetary Fund’s (IMF’s) October edition of the World Economic Outlook, global growth for 2018-19 is expected to remain close to 2017 levels, although the pace of growth will remain less vigorous in the last six months. The international organization has cut its global growth forecast by 0.2 percentage points to 3.7 percent, citing increased risks to global growth due to the negative impact of trade policies—in a veiled reference to the US—between April to September and a weaker outlook in some key emerging-market economies due to country-specific factors, tight financial conditions, higher oil-import bills and geopolitical tensions.
According to the IMF, growth in advanced economies is expected to remain above trend at 2.4 percent this year, before slipping to 2.1 percent in 2019. The Japanese economy is estimated to expand at 1.1 percent in 2018 and 0.9 percent in 2019, 0.1 percent lower than its earlier outlook in April of this year.