Morning commuters cross a road as high rise residential buildings stand in the background in Kawasaki, Kanagawa Prefecture, Japan. Photographer: Kiyoshi Ota/Bloomberg
Japan’s trade recovery powered into 2018, with exports and imports registering strong growth. The increase in imports resulted in the first monthly trade deficit since May 2017.
The value of exports rose 12.2 percent in January from a year earlier (forecast +9.4%). Imports grew 7.9 percent (forecast +7.7%). The January trade balance was a deficit of 943.4 billion yen (forecast -1 trillion yen). Export volumes rose 9.2 percent from a year earlier.
Japan enjoyed a strong export recovery in 2017 that helped push the nation’s economy to the longest expansion in nearly 30 years. Rising imports, a sign of improving domestic demand, indicate the Bank of Japan is making progress in its efforts to generate a self-sustaining economic recovery. A surging yen, though, is a risk. It will make imports cheaper, weighing on inflation, while cutting into exporters’ profits.
“An increase in imports shows that domestic demand is healthy,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo. “We should focus more on export trends rather than the trade balance to get an idea of economic growth, and in that sense Japan’s doing well. Exports are growing both in price and volume, so we can say that we’re seeing strong results.” “Exports remain strong as the global economy is going well and demand in China is strong,” said Masaki Kuwahara, senior economist at Nomura Securities Co. “I think exports will continue to do well for a while.” “The trade balance tends to be in the red in January,” Kuwahara said. “This isn’t a surprise in that sense and I think the deficit will be temporary.”
Japan’s adjusted trade balance showed a surplus of 373.3 billion yen (forecast +143.9 billion yen). Exports to China, Japan’s largest trading partner, rose 30.8 percent in January from a year earlier. Shipments to the U.S. rose 1.2 percent. Those to the EU increased 20.3 percent.
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