June Trade Statistics

◆According to June 2016 trade statistics, export value fell for the ninth consecutive month by -7.4% y/y. With the export price in decline due to yen appreciation, export value continues to fall on a year-to-year basis. Meanwhile, import value also declined for the eighteenth consecutive month at -18.8% y/y. This put the trade balance in the black for the first time in two months at +692.8 bil yen. Trade surplus is now in a moderate expansion trend due to the comeback in export volume and declining import value associated with the appreciation of the yen.

◆As for the future of exports, there is a good possibility that performance will continue to mark time, with some ups and downs along the way. The effects of monetary easing in the world economy overall produces a financial environment which is expected to provide support for relatively favorable demand in the area of household consumption. However, we expect that it will take quite a bit more time for a significant and sustainable recovery in demand for materials and capital goods (in other words corporate sector demand) to take hold as low operating rates continue, along with the decline in raw materials prices.

◆In the mid to long-term, there are fears that the effects of Brexit may bring downward pressure on exports. Meanwhile, difficulties are seen in EPA negotiations between Japan and the EU. (The original target for completing these negotiations was the end of the year.) Japanese corporations with offices in the UK are now rethinking their European strategy. The effects of Brexit on trade between Japan and the UK as well as Japan and Europe are expected to be significant. Developments in Brexit related negotiations, as well as other trade related negotiations will be watched closely.