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According to Japan’s Ministry of Finance trade statistics, nominal exports in July 2018 were up 3.9% y-y, below the consensus (Bloomberg survey median) forecast for a rise of 6.3%, and nominal imports were up 14.6%, in line with the consensus forecast for a rise of 14.2%, notes the research team at Nomura.

Key Quotes

“As a result, the trade deficit (original series) was ¥231.2bn, which was larger than the consensus forecast of a deficit of ¥41.2bn. The seasonally adjusted trade deficit was ¥45.6bn.”

“Using the BOJ’s export price index, we calculate that real exports in July 2018 were roughly flat, up 0.2% m-m (adjustments for inflation and seasonality made by Nomura). This would put July real exports 1.5% lower than the average for Apr-Jun, turning downward after 1.0% q-q growth in Apr-Jun.”

Risk of disappointing exports this summer

We expect exports from Japan to be sluggish in summer 2018 on a slowdown in overseas economies, particularly China. We had already been expecting overseas demand to be weak this summer, but July exports suggest that demand could turn out to be even weaker. We do expect growth in Japanese exports to accelerate again as policy action by the Chinese government helps China’s economy to pick up, but we also see a real concern that exports could be dragged down by the impact of US trade policies or slowdowns in emerging economies.”