JAPAN DATA: Export Growth Improves Ahead Of Tariffs, Trade Position In Surplus
Japan Feb trade figures saw a firmer export backdrop, albeit not as strong as market forecasts. We rose 11.4%y/y (forecast was 12.6%, the prior 7.3%). Imports were slightly below expectations as well, printing -0.7%y/y (+0.8% forecast, while the prior was +16.2%). The trade surplus was slightly below expectations, we printed ¥584.5bn, versus ¥688.3bn expected, but still a step up from the prior -¥2736.6bn outcome. The seasonally adjusted trade surplus was ¥182.3bn, which was also below forecasts but improved on the Jan print.
- The firmer export backdrop is welcomed, but much uncertainty rests with the outlook as we progress through Q2. Steel and aluminium tariffs have already been implemented by the US, while the US Administration is also planning to go ahead with reciprocal tariffs from the start of April.
- By country/region, exports rose 10.5%y/y to the US, +14.1%y/y to China, but fell 7.7%y/y to the EU. In volume terms, exports were still down y/y in aggregate but positive to Asia and China.
- The trade surplus was the highest since 2021 in both unadjusted and seasonally adjusted terms. The trend has been volatile in recent months on the trade position, but the improving trend looks to be in place.
- The chart below plots the trade balance (seasonally adjusted) against Citi's terms of trade proxy for Japan. Sustained trade surpluses will be a yen positive, all else equal.
Fig 1: Japan Trade Balance & Citi Japan ToT Proxy
Source: MNI - Market News/Bloomberg
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STIR: RBA Dated OIS Pricing Slightly Firmer Ahead Of Tomorrow’s RBA Decision
RBA-dated OIS pricing is flat to 2bps firmer across 2025 meetings today, led by late-2025 contracts, ahead of tomorrow’s RBA Policy Decision.
- A 25bp rate cut in April remains more than fully priced (118%), while the probability of a cut tomorrow stands at 83%, based on an effective cash rate of 4.34%.
- OIS pricing is mixed compared to pre-Q4 CPI levels on 24 January, with the Aug-25 meeting up 15bps since early February.
- Historically, it would be highly unusual for the RBA to diverge from market expectations, particularly given its lack of any official or unofficial pushback—a stance it has actively taken in the past.
- The last time the RBA defied market expectations by holding rates despite a 75%+ probability of a cut was April 2015, and before that, November 2012. In both instances, the RBA delivered a 25bp cut at the following meeting.
Figure 1: RBA-Dated OIS – Today Vs. Pre-Q4 CPI
Source: MNI – Market News / Bloomberg
MNI: MNI JAPAN Q4 REAL GDP +0.7% Q/Q; MNI MEDIAN +0.3%
- MNI JAPAN Q4 REAL GDP +0.7% Q/Q; MNI MEDIAN +0.3%
- JAPAN Q4 REAL GDP 2.8% ANNUALIZED; MNI MEDIAN +0.9%
- JAPAN Q4 CONSUMPTION +0.1% Q/Q; +0.1 PP CONTRIBUTION
- JAPAN Q4 CAPEX +0.5% Q/Q; +0.1 PP CONTRIBUTION
JGB TECHS: (H5) Fresh Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 142.73/144.48 - High Dec 9 / High Nov 11
- PRICE: 139.69 @ 16:21 GMT Feb 14
- SUP 1: 139.46 - Low Feb 13
- SUP 2: 139.38 - 2.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 138.87- 3.000 proj of the Aug 6 - Sep 3 - 9 price swing
A clear downtrend in JGB futures firmed further, with the latest fresh cycle lows reinforcing the condition. Note too that MA studies on the continuation chart are in a bear-mode setup, highlighting a clear downtrend. The 140.00 psychological handle has been pierced. Markets have shown through 139.38, a Fibonacci projection. For bulls, a reversal would open 142.73 and 144.48, the Dec 9 and Nov 11 high respectively. Gains would be considered corrective.
