Japan’s trade balance returned to surplus in February, with strength in the global economy supporting export growth even as lunar new year holidays caused a drop in sales to China.

Highlights

  • The value of exports increased 1.8 percent in February from a year earlier (forecast +1.4%).
  • Imports grew 16.5 percent (forecast +16.0%).
  • The February trade balance was a surplus of 3.4 billion yen ($32 million) versus the forecast of 89.1 billion yen.

Key Takeaways

The continued growth in exports suggest the global recovery remains firm, and sales to China should bounce back after the decline caused by the holidays. Yet a stronger yen poses some risks to the Japanese economy by making exports less competitive and weighing on inflation by reducing the price of imports. The chances of a trade war breaking out due to U.S. President Donald Trump’s tariffs is another potential source of downside for Japan.

Economist Takeaways

  • “Japan has been in an export-led recovery and I think that will continue this year,” said Masaki Kuwahara, a senior economist at Nomura Securities Co. in Tokyo. “Year-on-year exports slowed quite a bit due to the lunar new year. February is a month when it’s easy for them to drop off.”

Other Details

  • Japan’s adjusted trade balance showed a deficit of 201.5 billion yen (forecast -90.8 billion yen).
  • Exports to China, Japan’s largest trading partner, slipped 9.7 percent in February from a year earlier.
  • Shipments to the U.S. rose 4.3 percent.
  • Those to the EU increased 11.5 percent.
  • Exports of automobiles and aircraft-related goods increased while imports of clothing from China, LNG from Australia and petroleum products from South Korea showed strength