TOKYO: Japan’s trade surplus shrank in July, as weak domestic and international demand contributed to a double-digit drop in both imports and exports. The Ministry of Finance reported a trade surplus of ¥513.5 billion in July after June’s positive reading of ¥692.8 billion. The country’s exports plunged 14% in the 12 months through July, matching estimates. Exports had fallen 7.4% annually in June.
Imports declined at an even faster rate, falling 24.7% year-over-year. A median estimate called for a 20.6% drop. Imports had fallen 18.8% the previous month. In adjusted terms, Japan’s merchandise trade surplus narrowed to ¥317.6 billion. End markets in Asia, Europe and North America have all experienced weaker demand for Japanese goods, reflecting a combination of dismal economic growth and a surging Japanese yen.
A stronger local currency has created fresh headaches for Japanese policymakers, who have upped their stimulus efforts in order to promote growth and inflation in an economy that has seen very little of either. The Bank of Japan (BOJ) expanded its ETF purchase program last month, but came well short of satisfying the market’s demand for more stimulus. The Japanese yen surged against the dollar Thursday and was approaching its highest level since 2013. The USD/JPY exchange rate fell 0.4% to 99.8000
Japan’s economic expansion came to a standstill in the second quarter, adding to existing doubts about the health of the world’s third largest economy. Gross domestic product (GDP) was flat in the second quarter and grew just 0.2% year-over-year. The economy defied expectations in the first quarter, growing at a robust 2% annualized rate thank to an extra leap year day in February. The latest slowdown underscores the government’s challenge in devising policies that will produce a more sustainable rebound.
Investors widely expect the government to unleash new rounds of stimulus later this year. Prime Minister Shinzo Abe has a new mandate to spur growth after his coalition party scored a convincing “super-majority” in Japan’s upper house in June. In a separate report on Thursday the Ministry of Finance said capital flows into Japanese stocks and bonds rose last week. Investors bought a net of ¥1.298 trillion worth of bonds in the week to August 12. Investors purchased a net of ¥94.7 billion worth of stocks in the same week.
