Talking Points:
- Japanese trade balance figures came in quite strongly
- They suggest global commerce continues to fire despite possible headwinds
- They Yen slipped, probably because domestic policy implications are very limited
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The Japanese Yen weakened a little against the US Dollar Monday following official trade data which contained some encouraging signs even though much of it missed forecasts.
Japanese exports managed a fifth consecutive month of gains in April, even if their 7.5% on-year rise was a little less than markets had hoped for. Imports surged 15.1%, better than the 14.8% expected, for an overall trade balance of JPY481.7 billion ($4.3 billion).
Trade with China and Asia more broadly posted double-digit percentage gains, while trade with the US increased by 2.6%. However, the total level of surplus with the US fell just over 4% to JPY586.7 billion.
This could take some pressure of Japan and make it more difficult for US President Donald Trump to criticize Japanese trade practices. Trump was hawkish on the campaign trail about countries which run persistent trade surpluses with the US and Japan is among the “main offenders” here. However, he has been much less aggressive so far in office.
As a global trade bellwether these data suggest satisfactory expansion and are in line with other data from around the region, notably Australia and China. A more robust global environment generally encourages Japanese investors to seek yield overseas, and seems to have done so to some extent, with USD/JPY continuing to gain after the data hit.
However, with Japanese consumer prices still nowhere near the Bank of Japan’s 2% target, the trade figures probably have no monetary policy implications at all.
Official April inflation figures will be released on Friday and are expected to show a Consumer Price Index rise of 0.4% on-year. That would be better than the 0.2% recorded in March but still a fairly dismal return for years of stimulus.
The BoJ believes that its 2% target will be hit sometime around the 2018 fiscal year.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
