JAPAN DATA: Imports Surge, Weighing On Trade Position, Surplus With US Falls
Japan's January trade figures were mixed. Exports rose 7.2% y/y, close to the 7.7% forecast and up from the prior 2.8% pace. Imports surged though to 16.7%y/y, from 1.7% in Dec and against a 9.3% forecast. Not surprisingly, this drove weaker than forecast trade balance outcomes. The headline deficit was -¥2758.8bn, versus a ¥132.5bn surplus prior. In seasonally adjusted terms, the deficit was -¥856.6bn, versus -¥221.0bn prior.
- Exports were still down -2.0% in m/m terms. The y/y rise in exports puts Japan a little out of line with other NEA export orientated economies. These economies saw slower y/y momentum for Jan. Exports to China fell 6.2%y/y, and down 15.1% to the EU, but rose to the US 8.1%. The trade surplus with the US was down from Dec's level, falling by more than half.
- In volume terms exports were down 1.7% y/y, compared to Dec's pace of -2.6%.
- Import volumes were much stronger up 8.7% y/y. This is the strongest pace since 2021 in y/y terms. Import volumes were positive in y/y terms from all key regions, including the US (+2.4%), which could be an ongoing focus point as countries look to avoid tariff penalties from the US (by purchasing more from the US).
- It may also signal a firmer domestic demand backdrop. The chart below overlays import volumes y/y versus y/y real GDP growth. Import trends tend to volatile though (the white line on the chart)
- The weaker trade deficit position unwinds a modestly improving trend we saw through Q4 last year.
Fig 1: Japan Import Volumes & GDP Y/Y
Source: MNI - Market News/Bloomberg
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JAPAN DATA: Core Machine Orders Paint Positive Capex Backdrop
Japan Nov core machine orders data comfortably beat expectations. We were up 3.4%m/m, versus -0.8% forecast (prior was +2.1%). In y/y terms we rose 10.3%, against a 4.2% forecast (prior as 5.6%).
- The +10%y/y print for core machine orders was back close to 2024 highs. Momentum recovered strongly through Q4 and was mostly ahead of market expectations. In terms of the detail, the non-core items were quite volatile (which is typically the case). In y/y terms, manufacturing orders were 15.3% y/y, versus 7.6% prior. Non-manufacturing was 6.8% from 27.7% in Oct.
- The chart below overlays this print against Japan capex spending (ex Software) in y/y terms. It suggests a firm capex backdrop prevailed into year end for Japan.
- This isn't a key watch point for the BoJ, with wages and inflation more in focus, but still will be welcomed ahead of Friday's policy outcome. It is a sign of a resilient economic backdrop.
Fig 1: Japan Core Machine Orders (White Line) versus Japan Capex, Ex Software (Y/Y)
ASIA STOCKS: Foreign Investors Were Heavy Sellers Of Asian Equities Last Week
India continues to see heavy outflows with $4.5b in outflows to kick the year off. South Korea saw net outflows last week, however is the only region with a net inflow for the year.
- South Korea: Recorded outflows of -$213m Friday, contributing to a 5-day total of -$479m. YTD flows remain positive at +$288m. The 5-day average is -$96m, worse than the 20-day average of -$22m but better than the 100-day average of -$154m.
- Taiwan: Posted inflows of +$376m Friday, leading to a 5-day total of -$1.56b. YTD flows are negative at -$2.16b. The 5-day average is -$312m, worse than the 20-day average of -$129m and the 100-day average of -$125m.
- India: Registered outflows of -$502m Thursday, resulting in a 5-day total of -$2.57b. YTD flows are deeply negative at -$4.53b. The 5-day average is -$514m, worse than the 20-day average of -$300m and the 100-day average of -$72m.
- Indonesia: Recorded inflows of +$15m Friday, with a 5-day total of +$15m. YTD flows remain negative at -$166m. The 5-day average is +$3m, better than the 20-day average of -$17m and matching the 100-day average of +$3m.
- Thailand: Posted outflows of -$37m Friday, contributing to a 5-day total of -$160m. YTD flows are negative at -$222m. The 5-day average is -$32m, worse than the 20-day average of -$13m but slightly worse than the 100-day average of -$8m.
- Malaysia: Saw outflows of -$48m Friday, leading to a 5-day total of -$295m. YTD flows are negative at -$429m. The 5-day average is -$59m, worse than the 20-day average of -$27m and the 100-day average of -$17m.
- Philippines: Registered outflows of -$2m Friday, bringing the 5-day total to -$57m. YTD flows are negative at -$81m. The 5-day average is -$11m, worse than the 20-day average of -$7m and the 100-day average of -$1m.
Table 1: EM Asia Equity Flows
MNI: MNI JAPAN NOV CORE MACHINE ORDERS +3.4% M/M; OCT +2.1%
- MNI JAPAN NOV CORE MACHINE ORDERS +3.4% M/M; OCT +2.1%
