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Senior Economist at UOB Group Alvin Liew assessed the latest Japanese trade balance figures for the month of July.

Key Quotes

“Japan’s Jul trade balance fell back into a deficit of JPY249.6bn (from a surplus of JPY589.6bn in Jun and worse than the Bloomberg median estimate of -JPY194.5bn). The deficit was due to another month of declining exports which contracted by 1.6% y/y (a marked improvement from the -6.6% in Jun and Bloomberg’s median estimate of -2.3%) while the decline in imports was less severe than projected, at -1.2% y/y (from -5.2% in Mar, and Bloomberg’s median estimate at -2.3%)”.

“Japan’s Jul export disappointment remains in line with global weak export picture. And despite the better than expected GDP growth in the latest 2Q 2019 quarter for Japan, the external demand weakness looks set to continue into 3Q, weighing down on Japan’s growth outlook for 2H this year. The weak Jul exports print continues to affirm our cautious outlook for Japan’s trade prospects in 2019 which may be exacerbated by the on-going US-led trade uncertainties (specifically the US-China trade dispute) and more recently, the Japan-South Korea souring trade relations”.

“We revised our Japan’s export to contract 3.4% in 2019 (from +4.1% in 2018) while import is now expected to contract 0.7% (from 9.7% in 2018). Previously, we expected zero export growth while imports growth to be a modest 2.5% this year. Based on these revised projections, Japan is likely to record another trade deficit, amounting to JPY 3.4 trillion in 2019 (from a trade deficit of JPY 1.2 trillion in 2018)”.