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Japan Trade June 2019

Japan: Exports contract for seventh month running in June, weighed by trade tensions

Nominal yen-denominated merchandise exports fell 6.7% year-on-year in June, up from May’s 7.8% decline. The result was the seventh consecutive contraction and was larger than the 5.4% drop that market analysts had expected. The contraction came amid ongoing trade tensions between China and the United States, as well as a slowdown in the EU.

Meanwhile, imports fell 5.2% in annual terms in June. The reading was sharply down from the 1.5% decline logged in May and the 0.2% fall expected by market analysts.

As a result of the notable decline in exports, the merchandise trade surplus fell from JPY 0.7 trillion in June 2018 to JPY 0.6 trillion in June 2019 (May 2019: JPY 1.0 trillion deficit). Meanwhile, the 12-month trailing trade deficit rose from JPY 2.6 trillion in May to JPY 2.7 trillion in June.

Commenting on the reading, researchers at Nomura appeared to remain relatively pessimistic regarding short-term prospects for the external sector. According to their calculations, real exports only rebounded mildly in Q2 in quarter-on-quarter terms, after a sharp decline in Q1. They further noted that “Leading indicators of exports […] do not suggest that exports have begun heading upward, and there is still a great deal of uncertainty regarding the trade conflict between the US and China. We therefore think real exports are likely to continue to trend low in Jul-Sep onward.”

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