Exports declined for 13 months in a row.
Exports in Japan contracted -10.3%y/y (from 6.9% in Sep) while imports retreated a sharper -16.5%y/y in October (from -16.3% in Sep).
UOB noted that another repeat of sharper import retreat versus the export decline means that the trade balance data remained in a surplus position of JPY496.2bn in October, similar to September.
"We initially expected that after 12 months of y/y declines, low base effect may work in favour of export numbers for October trade data while sustained smartphone demand may also further boost exports from the IT segment. But that was not the case as exports contracted for the 13th straight month with all the major export segments resuming their y/y declines while exports of semiconductors (-7.1%y/y) & integrated circuits (-5.9%y/y) also fell after a strong but brief September rebound, dashing hopes of a nascent 4Q export recovery," it said.
That said, the research house believes Japan may still record trade surpluses in the subsequent months due to sharper import contraction.
Japan recorded a cumulative trade surplus of JPY3.3trn so far in the first ten months of 2016 and remains on track to etch out a full-year trade surplus in 2016, the first since 2010, but UOB expects it to come in less than JPY5trn, which unfortunately comes at the expense anemic on-shore demand & a weaker yen in 4Q 2016.
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