Japan’s Trade Balance in August

Japan’s trade balance shrank less than expected in August, with growth in imports and exports missing forecasts due to sluggish demand and local production disruptions.

The trade deficit was 695.3 billion yen ($4.93 billion), better than the anticipated 1.380 trillion yen deficit, but wider than the 628.7 billion yen deficit in the previous month.

The increased deficit was primarily due to a smaller-than-expected rise in exports, which only grew 5.6% year-on-year, missing the 10% growth expectation, and a slowdown from the 10.2% rise of the prior month.

A stronger yen, influenced by a hawkish Bank of Japan and potential U.S. interest rate cuts, put pressure on exports throughout August.

Japan’s trade deficit also resulted from a smaller-than-expected increase in imports, which grew by 2.3%, falling short of the anticipated 13.4% increase, and down from the 16.6% jump in the previous month.

This weak import figure raised concerns about the extent of improvement in local demand, despite rising wages, as Japan continues to deal with an ongoing deflationary trend over the past two years.