Trade data are here to confirm it: the dependence to China’s exports is weighing on the Japanese manufacturing industry. In decline territory for the fourth straight month, exports to China dropped 10.1% in June, confirming a slowing Chinese economy following the release of 2Q GDP figure of 6.20% (prior: 6.40%), a 27 years low. Although the release of Japan’s 2Q GDP is not expected before 9 August 2019, quarters-on-quarter data forecasts are pointing towards a fall between neutral to shrinkage of -0.20% (1Q: 0.60%). Yet the progressive improvement of trade with the US confirms that a US and Japan trade deal is nearing. JPY appreciation potential is high as global trade tensions concerns continue to boost demand for safe haven assets.

Japan’s trade balance is down 19% to JPY 589.5 billion ($5.46 billion), with total exports falling 6.70% (prior: -7.80%), a seventh consecutive slump while imports came at -5.20% (prior: -1.50%). Therefore, the decline is mainly driven by Asian countries, including China whose demand for chip making and electronic equipment decreased by over 20%. Yet the continued appreciation of trade exports to the US to 4.80% in June (prior: 3.30%), a nine straight increase, confirms that both trade partners are ramping up trade talks. Indeed, since Donald Trump’s state visit in Japan in May and threat of slapping tariffs of 25% on imported Japanese cars, both sides have been working on the opening of Japanese markets (i.e. agriculture imports) and reducing tariffs on Japanese auto parts, a solid win for Japanese automakers and US farmers. If a deal is found in September, when both President Donald Trump and Prime Minister Shinzo meet in New York, attention will turn to China, which will remain under pressure amid dragging trade talks with the US and improving bilateral trade conditions of its two largest business partners.

USD/JPY is currently trading at 107.77, approaching 108 short-term.

- advertisement -
Previous articleAUD Firms After Soft Employment Data
Next articleXAU/USD Might Decline
Trading foreign exchange, spot precious metals and any other product on the Forex platform involves significant risk of loss and may not be suitable for all investors. Prior to opening an account with Swissquote, consider your level of experience, investment objectives, assets, income and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not speculate, invest or hedge with capital you cannot afford to lose, that is borrowed or urgently needed or necessary for personal or family subsistence. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.