Japanese trade data continued to underwhelm in August, although not to the scale seen in July.
According to the Japanese government, exports fell by 9.6% in the 12 months to August in yen-denominated terms, missing expectations for a smaller contraction of 4.8%.
Although an ugly headline figure, it was an improvement on the 14% decline registered in the year to July.
In terms of major markets, the value of exports to China fell by 8.9% from 12 months earlier, leaving the overall decline to Asia at 9.4%. Exports to the US skidded by 14.5% whole those to the European Union dipped 0.7%.
While the scale of the decline may seem ugly, it must be remembered that the Japanese yen has appreciated by around 21% against the US dollar since the beginning of the year.
Therefore, if priced in US dollar or Chinese yuan terms, the value of exports would be higher on a year-on-year basis.
“Exports lacked momentum, although they were not so weak as the headline figure suggested,” Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute, told Reuters. “On average they were largely flat or on a gradual recovery.”
“Given the yen’s gains, however, exports would likely struggle to accelerate ahead,” he added.
On the other side of the ledger, imports fell by 17.3% compared to the levels of year earlier. Though weak, it was an improvement on the 24.7% contraction of July and forecasts for a decline of 17.8%.
The strength of the yen, along with the decline in crude oil prices over the same period, largely explains the negative year-on-year figure.
The value of imports has now fallen on an annualised basis in each of the past 20 months.
As a result of the larger-than-expected drop in exports, the national trade balance swung back into deficit for the first time in three months, coming in at 18.7 billion yen.
Markets had been expecting a trade surplus of 202.3 billion yen.
In the wake of the August trade data, all attention will now turn to the Bank of Japan’s September monetary policy decision, scheduled for release at some point on Wednesday afternoon.
Markets are evenly split as to whether or not the BOJ will ease policy at this meeting.
Indeed, of those who expect further easing, no one can say with any certainty as to what form it will take.
Most are forecasting that the BOJ will cut interest rates further into negative territory, with the possibility of a scaling back of asset purchases. However, some believe that the bank will increase asset purchases and leave interest rates unchanged at -0.1%.
It’s not a scenario that you deal with every day in terms of a monetary policy decision, likely ensuring that there’ll be significant levels of volatility surrounding the release.
It could arrive any time from around 1pm in Sydney.