Japanese Trade Surplus Rebounds

Fundamental data in Japan continues to highlight the challenges facing the Japanese economy as Central Bank and Government officials work quickly to introduce new stimulus measures to help spur a rebound in trade and economic activity.  The one main lingering concern is inflation, with the consumer price index set to be released later in the week ahead of the monetary policy decision due from the Bank of Japan on Friday.  Trade activity is one considerably source of weakness after the Ministry of Finance data showed that imports slumping by -18.80% year over year.  Although the figure beat estimates of a -19.70% contraction, the pace of decline has raised some concerns about the outlook for the trade environment.  Meanwhile, exports eased their own pace of loss, shrinking by only -7.40% during June.  The Yen is trading slightly weaker against the US dollar after the weekly reopening, rising to 106.22.

Following a contentious meeting of the Group of 20 nations over the weekend in China, one of the main topics of discussion outside of the “Brexit” referendum and subsequent fallout was China’s policies of subsidizing key state industries, notably the steel industry.  The concerns were raised amid widespread dumping, or offering products for prices that are significantly below market rates in a move that is widely viewed as anti-competitive.  In response to the growing rhetoric from other member nations and tariffs slapped on Chinese imports, policymakers introduced taxes on steel imports from Japan, South Korea, and the European Union overnight designed to fight back, potentially sparking a trade war. While still early on, these measures could be expanded to other areas, risking full blown economic protectionism.  The offshore Yuan is trending slightly lower against the dollar to start the week, with USDCNH trading at 6.6875.