Japan’s exports rose less than expected in January, with a decline in car sales to the U.S. and the EU contributing to a larger-than-forecast trade deficit.

Key Points

The value of exports rose 1.3 percent in January from a year earlier.

The median estimate of economists surveyed by Bloomberg indicated a 5 percent increase.

Import values climbed 8.5 percent over the same period, versus an estimated 4.8 percent rise. This was the first increase since December 2014.

The trade deficit for January was 1.1 trillion yen ($9.6 billion).

Japan tends to have a trade deficit in January due to the lunar new year celebrations in some of Japan’s biggest trading partners, such as China and South Korea.

Big Picture

After snapping a sustained slump in December, any strength in exports is a welcome boost to Prime Minister Shinzo Abe’s efforts to spur economic growth, and a buttress to corporate profits ahead of the annual spring wage negotiations. Meanwhile, higher commodity prices stemming from OPEC’s decision to cut production last year will affect Japan’s terms of trade as the nation imports all its energy supplies.

The trade balance and the currency have become issues in relations with the U.S. under the Trump administration. Japan is looking to arrange bilateral talks on trade and the economy in April, with Vice President Mike Pence and Finance Minister Taro Aso to lead the talks.

Economist Takeaways

The slowdown in exports is just temporary, according to Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo.

"Exports are still on the recovery track. The global economy is steadily recovering.”

"There’s no change to the view that Japan’s economy is driven by external demand while domestic demand is remaining weak," Kodama said.

Bob Baur said "I wouldn’t get too excited about any one-month number."

"Exports were really good in the fourth quarter," Baur, Principal Global Investors’ chief global economist, said on Bloomberg TV.

"Imports are better than people think, and that means somebody is buying, which I think is positive in the longer term for Japan."

The Details

Exports to the U.S. fell 6.6 percent from a year earlier.

Shipments to the EU decreased 5.6 percent.

Those to China, Japan’s largest trading partner, climbed 3.1 percent.

The value of exports of motor vehicle fell 6.7 percent.

Crude oil imports jumped almost 36 percent by value, contributing 2.8 percent of the rise in total imports.

Export volumes declined 0.3 percent.

Source:
courtesy of BLOOMBERG

by Connor Cislo

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