The Takeaway:Japan’s Merchandise trade balance posted a larger trade deficit -> Weak demand from Europe while an increase in trading activities with China -> USD/JPY was little changed
Japan’s Merchandise trade balance posted a trade deficit of -¥1629.4B versus a revised trade deficit of -¥643.3B in December, came in worse than expectation set for -¥1379.6B.
Imports exceeded exports in January, in which imports increased by 7.3percent (YoY). while exports merely increased by 6.4percent (YoY). In particular, exports to European posted a -4.5percent decrease in January, which is the largest drag compared to exports to other countries. Demand from Europe is likely to remain weak amid a sluggish economic growth as well as the ongoing political issues. Meanwhile, imports from China rose 3.0 percent and exports to China rose 6.5 percent, signaling a mitigated territorial dispute between China and Japan.
The recent weakness in the yen may not have an immediate effect on the trade balance in January as merchants typically place their orders one to two months in advance. As a result, the trade balance from January onwards will provide further clarity for the Japanese trading activities. On the other hand, the weakness in the yen will increase the cost of import goods and may further widen he trade deficit.
The worse than expected trade balance did not faze forex traders and the USD/JPY is trading at 93.787 at the time of writing.
USD/JPY 1 Minute Chart
Charted Created by Robin Leung using Marketscope 2.0