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Japan Trade February 2018

Japan: Export growth slows in February due to fewer working days; Japan signs CPTPP on 8 March

Nominal yen-denominated merchandise exports increased 1.8% year-on-year in February, decelerating substantially from January’s 12.2% rise and coming in just below market expectations of a 1.9% increase. The slowdown was largely due to fewer working days in February this year because of the timing of the Lunar New Year holidays—the holidays took place in January last year.

Higher exports in February were buttressed by an increase in exports of transport equipment, particularly motor vehicles, compared to the same month last year. On the other hand, there were fewer exports of machinery, electrical machinery and plastic materials in the month, which weighed on overall growth.

Year-on-year growth in imports accelerated to 16.5% in February from 7.9% in January, slightly below market expectations of a 17.1% increase. Increased imports of mineral fuels, notably liquified natural gas, and chemicals, were largely responsible for the accelerated overall growth rate.

Despite slower export growth, the merchandise trade balance swung to a surplus of JPY 3.4 billion in February from a deficit of JPY 944 billion in January. Compared to the same month last year, the balance deteriorated from a surplus of JPY 804 billion. Meanwhile, the 12-month trailing trade surplus fell to JPY 2.3 trillion in February, down from the JPY 3.1 trillion surplus recorded in the previous month.

In other recent developments, Japan, along with ten other countries, signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on 8 March. The United States withdrew its participation in the previously signed iteration of this agreement—the Trans-Pacific Partnership—in January last year, and, since then, the Japanese government had been at the forefront of efforts to renegotiate it with the remaining countries. The new CPTPP will remove most trading tariffs for a bloc representing nearly 500 million people and more than 13% of global trade. Even without the participation of the United States, the promise of better market access to such a large bloc represents a lucrative opportunity for Japanese exporters. However, they will have to wait until six of the eleven countries ratify the newly signed trade deal in their domestic legislatures before the agreement officially enters into force.

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