Japan: Key development on trade? – BTMU

FXStreet (Barcelona) - Reviewing today’s Japanese trade balance data release, Derek Halpenny, European Head of GMR at Bank of Tokyo-Mitsubishi UFJ, views that there is something more in the Japanese data than month-on-month quirks related to timing of Lunar New Year, and further comments on USD/JPY price action.

Key Quotes

“Today, the trade report for March revealed a seasonally adjusted trade surplus of JPY 3.3bn, the first trade surplus since the month before the earthquake and tsunami in March 2011. As a result, the trade deficit in Q1 2015 totalled JPY 1,369.4bn, down notably from the deficit of JPY 5,052bn recorded in the same quarter of 2014.”

“While the surplus is more explained by the 14.5% annual drop in imports due in part to falling energy prices, exports are now also performing well. Some are citing Lunar new year distortions as a reason for exports rebounding in March but that belies the fact that there is clear evidence of some underlying improvement as well.”

“The average annual growth rate in exports in Q1 of 9.3% was the strongest since 2010, which suggests something more to the March data than month to month quirks related to the timing of Lunar New Year. In volume terms too there was good news – on an annual basis the volume of exports were 3.3% higher, the largest gain since March 2012.”

“Bar the Swiss franc, the Japanese yen is the only G10 currency that has out-performed the US dollar on a year-to-date basis and we continue to believe that gains this year for USD/JPY will only come about once the markets seriously price in the prospect of the first rate increase by the Federal Reserve.”

“Even then, given the scale of yen depreciation already behind us, we see the yen out-performing many other currencies versus the US dollar as yen selling appetite remains more muted.”