In January 2018, Japan's exports and imports showed strong growth, which led to the first monthly trade deficit since May 2017.
The value of exports in January rose by 12.2% on a yearly basis in Japan, beating predictions for a 10.3% increase. Imports grew by 7.9% versus expectations for a 7.7% rise.
As a result, the trade balance came to a deficit of 943.4 billion yen ($8.87 billion), compared with the median estimate of a 1 trillion yen deficit.
Export volumes rose by 9.2% from a year before. Exports to China soared by 30.8% year-over-year, while shipments to the US increased by 1.2%. Exports to the EU advanced by 20.3%.
Growing imports amid rising domestic demand indicate that the Bank of Japan is making progress in its commitment to create a sustained economic recovery. However, a strengthening yen could make imports cheaper, weighing on inflation and reducing exporters’ profits.
Japan’s GDP showed growth in the fourth quarter of 2017, for the eighth quarter in a row. That was the longest expansion since 1989, despite a sharp decline in the pace of growth.
If modest growth continues, especially amid a strong yen, expectations about the policy normalization by the Bank of Japan are likely to weaken.
