Alvin Liew

Alvin.LiewTS@uobgroup.com

Global Economics & Markets Research

Email: GlobalEcoMktResearch@uobgroup.com

Flash Notes
URL: www.uob.com.sg/research

Wednesday, 22 March 2017

Japan: 11.3% Feb Exports Jump Offers Redemption To 1Q Deficit

Japans exports grew more than expected at 11.3%y/y in Feb (from +1.3% in Jan, beating Bloomberg forecast of +10.1%),
the 3rd month of y/y expansion & the fastest increase since Jan 2015 while imports growth moderated markedly to 1.2%y/y in
Feb (from 8.5%y/y in Jan and in line with Bloomberg forecast of 1.3%), nonetheless the 2nd consecutive y/y increase. As a result
of the jump in exports with the subdued increase in imports, Japan returned back into trade surplus with JPY813.4bn Feb,
helping to partly defray the trade deficit of JPY1.088trn in Jan. Japan is at a small deficit of JPY137bn in the first 2 months of 2017.

Export growth was broad-based in February with the exception of transport equipment which remained in another month of
contraction, recording a small decline of -0.2%y/y in Feb (from -3.5% in Jan). The key segments of machinery (+16.6%y/y, 3.3ppt
of headline growth, 20.7% share of export value) and electrical machinery (13.5%y/y, 2.3ppt, 17.1% share of export value)
which includes its sub-segments of semiconductors (+16.8%y/y, +0.8ppt, 4.9% share of export value) & ICs (23.1%y/y, 0.7ppt,
3.4% share of export value), anchored headline export growth. In terms of exports destination, growth was well anchored
by exports to Asia especially exports to China which surged 28.2%y/y (from +3.1%y/y in Jan) to JPY1.196bn, nearing to the
record high JPY1.3trn in Dec 2016. Exports to US in comparison grew just 0.4%y/y in Feb but it is still the single largest export
destination for Japan.

The main contributor for the positive February import growth

Strong Feb Exports Surge Helped Narrow Trade Deficit In First 2
was unsurprisingly mineral fuels imports which increased
Months of 2017
38.1%y/y, contributing 7ppt of the 1.2% import increase (25.2%
share of import value). This meant that the rest of the major import 8,000 80
segments actually recorded declines in February (after the brief 6,000 60
increase in January) negating the bulk of the mineral fuels import
4,000 40
increase, and dashing hopes of any sustained pickup in domestic
demand. 2,000 20

0 0
We continue to expect Japans exports recovery to extend for a
few more months at least but unlikely to be too exciting (single-digit -2,000 -20

growth). If imports growth continue to remain subdued for March -4,000 -40
(like what we saw in Feb), then the small trade deficit in Jan-Feb
-6,000 -60
could be overturned, bring Japan back into a small trade surplus Jan-08 Oct-09 Jul-11 Apr-13 Jan-15 Oct-16
for 1Q 2017, putting our forecast of a trade surplus of JPY 2-4trn Trade Balance (JPY bn)
in 2017 back on track. Exports (JPY bn)
Imports (JPY bn)
Exports Growth (%y/y - RHS)
Imports Growth (%y/y - RHS)

Please click on the link to access the Japan February 2017 Trade data Source: CEIC, Global Economics & Markets Research Estimates (As of 22 Mar 2017)

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