THE TAKEAWAY: Japan’s Merchandise Trade Balance marked 8th straight deficit > Export growth may be bolstered by declining Yen value, but power remains in hands of BoJ > Yen Outlook Neutral
Japan’s Merchandise Trade Deficit for February was slightly lower than expected at -777.5B Yen versus estimates of -855.9B Yen and the previous month’s deficit of -1630.9B Yen. Meanwhile Japan’s exports (YoY) fell by -2.9% in February versus expectations of -1.7% and imports (YoY) fell to 11.9% in February versus expectations of 15%. The Yen did not show significant reaction following the news, with the USD/JPY fluctuating slightly following the data release.
Japan’s merchandise trade balance has been on a downward trend since early 2011 and has been in deficit territory over the last eight months straight. This trend may continue as export growth has been fluctuating in and out of positive/negative growth (YoY), while imports have been growing at a faster rate. With 15% of Japan’s GDP comprised of net exports, economic growth will likely a require higher level of exports. This may be achieved in the near future thanks to the Yen’s rapid fall as a result of the Bank of Japan’s (BoJ) asset purchase plan for 2014. It is the comments and actions of the BoJ, which will likely impact the Yen moving forward. Forex traders should be sure to mark off April 4th on their trading calendars as that is the next BoJ rate decision meeting date.
USD/JPY (2 Hour Chart)
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