Trade deficit details - August 2014
Published 28 August 2014
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0.1 Detail
Japan’s July trade balance showed a deficit of 964 billion yen (£5.6bn) - the 25th consecutive monthly deficit - against a backdrop of continuing robust demand for fuel due following the shutdown of Japan’s nuclear reactors.
The deficit declined 6.6% compared to a year ago (YOY), as exports grew more than imports (3.9% vs. 2.3%). On a volume basis, exports increased moderately by 0.9% while imports fell by 0.4%. The size of the deficit was larger than consensus estimates of 705 billion yen but financial markets’ reaction to the figures has been limited.
Strong automotive exports (up 8.1 % YOY) and metal processing machinery (up 35.7% YOY) were mostly responsible for the uptick in exports. Fuel imports continued to underpin overall imports, showing a firm growth rate (7.0% YOY).
Increased demand from the EU (10.2% YOY), China (2.6% YOY) and US (2.1% YOY) supported the growth in exports. Imports from the Middle East (9.6% YOY, mostly fuel) and US (6.2% YOY, mostly food) accounted for much of the increase in imports. During July, Japanese figures show that UK visible exports to Japan increased 10.8% YOY to 60.7 bn yen (£355 million) while Japanese exports to the UK rose by 22.5% YOY to 115 bn yen (£673 million).
0.2 Comment
The Bank of Japan recently downgraded its assessment on exports to ‘have shown some weaknesses’ from ‘have recently levelled off’ - reflecting wider opinion that export growth is disappointingly slow. Commentators attribute the slower-than-expected improvement in exports largely to continued off-shoring of Japanese manufacturing and the weakening competitiveness of some major Japanese companies.
Stimulating private domestic demand through structural reforms will be critical for sustainable long term growth While there has been some progress, structural reform implementation remains some way off.. The pace may pick up in coming months. .
Despite some signs of improvement, it looks unlikely that Japan’s trade deficit will improve meaningfully until a number of nuclear reactors are restarted. Some private economic’ estimatessggest that for each nuclear reactor restarted the trade balance will improve by 100bn Yen.
0.3 Disclaimer
The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.