Japan expected to announce narrower trade deficit
Japan’s balance of trade data for June will be released today, likely showing a significant narrower trade deficit than in May.
Japan’s export-led economy took a substantial hit due to the COVID-19 pandemic in April, with exports falling to 5.02 trillion yen, a 21.9% year on year fall and an 11-year low. Imports declined significantly less—only 7.2% year on year—and pushed Japan into a trade deficit.
This trend continued in May, with the country reporting an $7.8 billion trade deficit, although analysts expect the deficit to narrow in June to only $327 million. This is likely due to a bigger fall in imports than exports, suggesting that demand and domestic consumption are still being hampered by COVID-19; the country yesterday reported the most daily cases in over three months.
Expect Japan’s export numbers to increase as China—Tokyo’s largest trading partner—reopens, but its trade surplus will likely not return until the fall at the earliest. The continuing COVID-19 outbreak in the US, plus the massive fall in demand for vehicles prompted by widespread lockdowns, could even push any recovery of the trade surplus to 2021. Although the Bank of Japan anticipates a modest recovery in Japan’s economy this year, expect Japan to report a significant contraction in 2020 and low growth next year.
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