January 2018 Trade Statistics

◆According to January 2018 trade statistics, export value grew by +12.2% y/y, while market consensus was at +9.4%. This represents a higher growth rate than the previous month (+9.3%). The Japan Customs rate in January was 112.47 yen/dlr, representing yen appreciation of 3.4% in y/y terms.

◆Export volume (seasonally adjusted by DIR) was down for the first time in four months at -0.3% m/m. Looking at export volume by source of demand, exports to the US (-3.6%) and to Asia (-1.2%) brought downward pressure on overall performance. As for exports to the US, motor vehicles suffered a major decline. As for exports to Asia, the floor was raised considerably by the performance of exports to China due to the shift in dates of the Lunar New Year season in comparison to last year. However, a decline was still experienced on an m/m basis. On the other hand, positive factors included exports to the EU (+2.9%). Exports to the EU were given a major boost by growth in exports of ships.

◆As for the future of exports, we see underlying strength continuing for the overseas economy bringing moderate growth in Japan’s exports. As for China’s economy, many factors which could lead to a future slowdown are present, while favorable economic performance in the US and the EU is a factor which should lead to moderate growth in exports. However, the trend in the exchange rate is a point of concern. While the effects of a strong yen are not as damaging in the era of overseas production, they are not absent. If the yen continues to appreciate in the future, Japanese products will lose their price competitiveness, and this could in turn bring downward pressure on export volume.