Japan: External demand remains strong – Capital Economics

Marcel Thieliant, Senior Japan Economist at Capital Economics, notes that Japanese trade values were distorted in January by seasonal swings ahead of the Lunar New Year and the bigger picture is that external demand remains robust.

Key Quotes

“Export values picked up from 9.3% y/y in December to 12.2% y/y in January. (Bloomberg median: 9.4%) By contrast, import values slowed from 14.9% y/y to 7.9% y/y. Some of this seems to reflect seasonal swings ahead of the Lunar New Year: exports to China soared by 30.3% y/y while imports from China dropped by 3.3% y/y.”

“The seasonally-adjusted figures show a 1.1% m/m fall in export values and a 5.2% m/m plunge in import values. This lifted the adjusted trade surplus from ¥91 billion to an eleven-month high of ¥373 billion.”

“The slowdown in import values in recent months largely reflects smaller gains in import prices, which is mostly due to the recent strengthening of the exchange rate. Export prices have also slowed but not quite as sharply. Indeed, the 2.6% y/y rise in import volumes last month was broadly in line with the 2.8% y/y rise recorded last year. Meanwhile, the 9.2% y/y rise in export volumes was the strongest it has been since August and the smoother 3-month average shows continued strength in external demand.”

“The Bank of Japan will only release seasonally-adjusted trade volume data later today. We estimate that export volumes dropped by around 1% m/m last month while import values slumped by around 5% m/m. If we are right, net exports would be on track for a rebound this quarter.”

“Looking ahead, the export climate index climbed to a fresh high in January and suggests that export volumes will continue to expand at a healthy pace. We’ve pencilled in a 4.5% rise in export volumes this year.”