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Senior Economist at UOB Group Alvin Liew assessed the latest results in the Japanese trade balance.

Key Quotes

“Japan recorded a month of trade balance surplus amounting to JPY1.1098 trillion in February, the largest since 2007 and nearly offsetting the JPY1.313 trillion deficit recorded in January… On an adjusted basis, the surplus was a smaller JPY498.3bn (from a deficit of JPY78.7bn in January).”

“Exports continued to contract but by a less severe 1.0% y/y…This was 15th consecutive month of decline, the longest stretch of monthly contraction since 1987. In spite of the weak exports, there was a material surplus in February because the decline in imports was even sharper at -14.0% y/y…Imports has been in decline for 10 straight months since May 2019.”

We forecast Japan’s exports will contract further by 6.8% in 2020 (from +5.6% in 2019) while imports will contract a sharper 9% (from +5.0% in 2019). Based on these projections, Japan is likely to record another trade deficit, amounting to JPY 1.6 trillion in 2020 (from a trade deficit of JPY 3.6 trillion in 2019).“