Japan's Trade Balance Improves

Japan's trade balance unexpectedly improved in November, supported by stronger-than-expected exports due to increased demand in the U.S. and China, along with a softer yen.

Government data released on Wednesday shows the trade balance recorded a deficit of 117.6 billion yen ($770 million), better than the anticipated deficit of 688.9 billion yen, and an improvement from October’s deficit of 462.1 billion yen.

Export Growth

The improvement was mainly driven by a 3.8% year-on-year rise in exports in November, which surpassed expectations of 2.8%. This growth also reflects an uptick from October's 3.1% increase.

The increased exports are attributed to enhanced demand from Japan's key trading partners, particularly the U.S. and China. The latter has shown significant improvements as Beijing has rolled out numerous stimulus measures in recent months.

Currency Influence

A weaker yen furthered the boost to exports, with the USDJPY currency pair experiencing a sharp rise in November, reaching a peak not seen in over three months.

Import Challenges

Conversely, local demand appears weak, with Japanese imports decreasing by 3.8% year-on-year, contrary to expectations of a 1% rise.

While private consumption remains steady, supported by rising Japanese wages, capital spending has sharply declined as businesses are cautious due to an uncertain economic outlook.