"The decline in export growth partly reflects overseas conditions, with China's economy likely to slow down. But the weak yen means the pace of export increases won't drop so rapidly."
- Minoru Nogimori, an economist at Nomura Securities Co.
USD/JPY moved higher on Monday after disappointing trade figures, while BoJ Governor Kuroda reiterated the world's third largest economy is improving moderately. The Yen fell 0.34% against the greenback hitting 98.10, and loosing 0.3% to 132.14 versus the single currency. Despite signs of a pickup in economic growth, the fact Japan logged 15th straight monthly trade deficit is adding more pressure on Shinzo Abe in sustaining momentum in the economy. The deficit rose to 932 billion yen in September, 64% higher than a year ago, and narrowing from August's gap of 960.3 billion. On a seasonally adjusted basis the gap ballooned to 1091.3 billion, up from 791.4 a month earlier.
The main disappointment came from exports, which advanced only 11.5% annually, the weakest pace in three months, compared with a 14.6% increase in August and 4.1% lower than figure expected by analysts. The main downside pressure, however, came from imports, which rocketed 16.5% over the same period. While Abenomics are helping to push the Yen lower, and domestic companies are benefitting from a 12% fall against the Dollar so far this year, the other side of the coin is higher import costs, especially for energy. With slowing growth in exports, Abe faces more pressure as it is vital for the economy to go into next year with a head of steam to assure the economy will withstand the blow to domestic consumption from April's sales-tax increase.
© Dukascopy Bank SA