Japanese trade data was weaker than expected once again over August, remaining in the red for a second consecutive month. The headline trade balance figure was -445 bln JPY, showing a stark increase from July’s -232 bln JPY. The seasonally adjusted number was also weak at – 190bln JPY, far worse than the expected -144 bln JPY figure the market was looking for.
While the top sheet data made for bad reading, the breakdown does highlight some positives with exports having accelerated over the month rising 6.6% from July’s 3.9%. This increase was primarily driven by a rise in microchip-making machinery and autos. Notably, export volumes rose 1.1%, up from 0.9% in July suggesting that, so far, the US / China trade war hasn’t affected export demand. Imports were also substantial, rising 15.4% over August, up from 14.6% in July driven by strength in oil prices.
Interesting to note also is that exports to the US rose 5.3% in August, marking their first increase in three months on the back of positive contributions from pharmaceuticals and construction/mining equipment.
The US and Japan are due to hold another round of trade talks on September 21st which will be closely watched by the market following Trump’s recent comments to reporters that he is considering applying tariffs to Japanese goods.
After retesting the broken bearish trend line from 2016 highs, USDJPY has found some support and is turning higher again. However, there are two key resistance levels right above market at the 113.16 level ( current 2018 high) and the 114.51 level which was a strong resistance level over 2017.