FX.co ★ Japan’s exports increase by 12% in January

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.