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    Japan recorded a trade surplus

    Breaking News: Japan’s balance of trade has reached surplus for the first time in nearly three years in March. This event was expected – economists predicted it to happen, although the size of the trade surplus turn out to be more than the forecast: 229.3 billion Yen against the expected 47.9 billion.

    Needless to say – this is a long-awaited event. Let me remind you, that a year ago, on 14 March and 23 April last year, I wrote about the research of the so-called «J-shaped curve” hypothesis proposed by the economist Mikihiro Matsuoka from the Deutsche Bank. The studies showed that the improvement of the trade balance, caused by the devaluation of the national currency, begins on average one and a half years after the beginning of devaluation process. Based on these findings, one could expect that 2014 would be a turning point for Japan’s international trade.

    It turned out to be almost like that in reality. The deterioration of Japan’s trade balance, which lasted for six years, from 2008 to 2013, stopped in 2014. Having reached the historic high at 2.795 trillion yen in January 2014, trade deficit then began to gradually decrease – this tendency was observed for the whole last year. This process accelerated in the first quarter of this year, and finally brought the index into the “green zone” at the end of March (see. Chart).

    japan-balance-of-trade22-4-15

    Does this mean that the trade deficit in Japan is over? Alas, there’s no such certainty. After all, Japan has reached the trade surplus not only thanks to the growth of exports which grew stronger due to the devaluation of the yen, but also because of the fall in oil prices – one of Japan’s main imported goods. And if oil prices begin to rise, the trade balance will face the risk of slipping into the negative territory again.

    If the long-awaited trade surplus becomes the new reality for the Japanese foreign trade, it will provide a long-term support for the national currency. And then, most likely, the devaluation of the yen will be completed.

     

    Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!

    Breaking News: Japan’s balance of trade has reached surplus for the first time in nearly three years in March. This event was expected – economists predicted it to happen, although the size of the trade surplus turn out to be more than the forecast: 229.3 billion Yen against the expected 47.9 billion.

    Needless to say – this is a long-awaited event. Let me remind you, that a year ago, on 14 March and 23 April last year, I wrote about the research of the so-called «J-shaped curve” hypothesis proposed by the economist Mikihiro Matsuoka from the Deutsche Bank. The studies showed that the improvement of the trade balance, caused by the devaluation of the national currency, begins on average one and a half years after the beginning of devaluation process. Based on these findings, one could expect that 2014 would be a turning point for Japan’s international trade.

    It turned out to be almost like that in reality. The deterioration of Japan’s trade balance, which lasted for six years, from 2008 to 2013, stopped in 2014. Having reached the historic high at 2.795 trillion yen in January 2014, trade deficit then began to gradually decrease – this tendency was observed for the whole last year. This process accelerated in the first quarter of this year, and finally brought the index into the “green zone” at the end of March (see. Chart).

    japan-balance-of-trade22-4-15

    Does this mean that the trade deficit in Japan is over? Alas, there’s no such certainty. After all, Japan has reached the trade surplus not only thanks to the growth of exports which grew stronger due to the devaluation of the yen, but also because of the fall in oil prices – one of Japan’s main imported goods. And if oil prices begin to rise, the trade balance will face the risk of slipping into the negative territory again.

    If the long-awaited trade surplus becomes the new reality for the Japanese foreign trade, it will provide a long-term support for the national currency. And then, most likely, the devaluation of the yen will be completed.

     

    Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!


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