Higher than expected exports and trade balance data for June stirred some risk appetite trading, confirming a recovery in the critical Japanese trade and manufacturing industries. The recovery in exports was led by a jump in exports to the EU.

THE TAKEAWAY: Higher exports, recovering Japanese industries > Increased risk appetite > JPY weakens

EVENT

ACT

EXP

PREV

Merchandise Trade Exports (YoY)

-1.6%

-4.1%

-10.3%

Merchandise Trade Imports (YoY)

9.8%

11.0%

12.3%

Merchandise Trade Balance Total (JPY)

70.7B

-149.0B

-855.8B

Adjusted Merchandise Trade Balance (JPY)

-191.2B

-250.4B

-450.0B

The improvement in exports was led by an increase in trade to the United States and the European Union, suggesting a recovery in Japanese machinery industries, including major automobile makers. Year-over-year exports to the United States rose to -6.1% in June from -14.6% previously at -23.3% in April. Exports to the European Union were recorded at 8.0% in June, jumping from -8.8% in May and -10.7% in April.

Japanese_Trade_Balance.docx_body_Picture_5.png, Japanese Yen Weaker as Exports Data Show Recovery Promise

Japanese merchandise trade balance total. Chart generated with Bloomberg LP Professional Terminal.

The Japanese yen weakened immediately after the report on expectations that one of the world’s largest economies was recovering after devastating infrastructural damage following the March Tohoku Earthquakes. At the time of writing, the Japanese benchmark Nikkei 225 was up mildly at 0.07%, holding at 10015.

Japanese_Trade_Balance.docx_body_Picture_4.png, Japanese Yen Weaker as Exports Data Show Recovery Promise

USDJPY 5 minute chart; vertical line indicates time of data release. Chart generated with FXCM Strategy Trader.