BoJ Ignores Worst April Trade Deficit Ever - Suggests "Economy Has Started Picking Up"

Tyler Durden's picture

Surging nominal imports and a miss for exports just about sums up perfectly just how the reality of Abenomics is crushing the real economy as the market goes from strength to strength on the hope that recovery is just around the corner. For the 28th month in a row Japan trade deficit has dropped YoY and its 12-month average is now at its worst ever. Energy costs are driving up imports (and adjusted for the devaluation in the JPY, the data is simply horrendous. Of course, there are green shoots - CPI is not deflating as fast as it was... and 'some' inflation expectations are rising (though as we noted here that is simply due to the tax expectations). Contrary to expectations held by some in the bond market, the BOJ did not comment on the sharp fluctuation in JGB yields since April as a result of monetary relaxation - on the basis, we assume, that if they don't mention it, it never happened. The result post a nothing-burger of 'more uncertainty' from the BoJ, the Nikkei keeps screaming higher, JPY rallied then fell back, and JGBs are sliding higher in yield.

Japan's trade balance...


Goldman On the Unexpectedly large trade deficit:

Larger-than-expected trade deficit in April: The April trade deficit came in larger than the market consensus (¥621.1 bn) at ¥879.9 bn prompted mainly by continued yen depreciation and a resulting rise in import prices. There was a particularly prominent rise in the value of mineral fuel imports (LNG, etc.), and the overall value of imports was up 9.4% yoy in April, the largest April figure on record. At the same time, overall export value was up 3.8% yoy in April (+1.1% in March), showing acceleration and a second straight month of positive growth. Export volume was still negative in April (-5.3% yoy vs. -9.8% in March), but the degree of decline is shrinking.


Export to the US and Asia recovering, Europe remains sluggish: Export value to the US was up by a substantial 14.8% yoy in April (+7.0% in March), and exports to Asia also showed signs of recovery at +4.3% yoy (+0.3% in March). Exports to China showed the first positive year-on-year growth in three months, albeit small at +0.3% (-2.5% in March). By contrast, exports to Europe remained sluggish at -3.5% yoy in April (-4.7% in March).


Outlook—More trade deficits ahead, but we expect mild improvement in line with J curve: We expect the trade balance to remain in the red in the near term, but we see a gradual improvement over time in line with the J curve. We still see little boost to export volumes from the weaker yen but expect it to gradually become more evident around summer.


JGBs react to BoJ...


Full BoJ Statement:

Statement on Monetary Policy

1. At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided, by a unanimous vote, to set the following guideline for money market operations for the intermeeting:


The Bank of Japan will conduct money market operations so that the monetary base will increase at an annual pace of about 60-70 trillion yen.


2. With regard to the asset purchases, the Bank will continue with the following guidelines:
a) The Bank will purchase Japanese government bonds (JGBs) so that their amount outstanding will increase at an annual pace of about 50 trillion yen, and that the average remaining maturity of the Bank's JGB purchases will be about seven years.
b) The Bank will purchase exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) so that their amounts outstanding will increase at an annual pace of about 1 trillion yen and about 30 billion yen respectively.
c) As for CP and corporate bonds, the Bank will continue with those asset purchases until their amounts outstanding reach 2.2 trillion yen and 3.2 trillion yen respectively by end-2013; thereafter, it will maintain those amounts outstanding.


3. Japan's economy has started picking up. Exports have stopped decreasing as overseas economies have been moving out of the deceleration phase that had continued since last year and are gradually heading toward a pick-up. Business fixed investment continues to show resilience in nonmanufacturing and appears to have stopped weakening on the whole. Public investment has continued to increase, and housing investment has generally been picking up. Private consumption has seen increased resilience, assisted by the improvement in consumer sentiment. Reflecting these developments in demand both at home and abroad, industrial production has stopped decreasing and signs of picking up have become increasingly evident. Meanwhile, financial conditions are accommodative. On the price front, the year-on-year rate of change in the consumer price index (CPI, all items less fresh food) has been negative, due to the reversal of the previous year's movements in energy-related and durable consumer goods. Some indicators suggest a rise in inflation expectations.


4. With regard to the outlook, Japan's economy is expected to return to a moderate recovery path, mainly against the background that domestic demand remains resilient due to the effects of monetary easing as well as various economic measures, and that growth rates of overseas economies gradually pick up. The year-on-year rate of change in the CPI is expected to register smaller declines for the time being, and thereafter is likely to gradually turn positive.


5. Regarding risks, there remains a high degree of uncertainty concerning Japan's economy, including the prospects for the European debt problem and the growth momentum of the U.S. economy as well as the emerging and commodity-exporting economies.


6. The Bank will continue with quantitative and qualitative monetary easing, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. It will examine both upside and downside risks to economic activity and prices, and make adjustments as appropriate?'


Such conduct of monetary policy will support the positive movements in economic activity and financial markets, contribute to a rise in inflation expectations, and lead Japan's economy to overcome deflation that has lasted for nearly 15 years.

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DoChenRollingBearing's picture

If the Yen keeps going down, Ameru will do its part to help cure the Japanese trade deficit by buying hand-over-fist as their bearing prices come down.

RockyRacoon's picture

Pockets of prosperity, eh?  Good for some, not so hot for others.  Glad you are able to profit from the situation.

King_of_simpletons's picture

Haven't you heard ? The economy has been picking up for 5 years since 2008.

espirit's picture

Picking up speed, eh?  Sounds about right coming from the Wiley E. Coyote School of Economics where "it's not the fall that hurts, but the sudden stop at the bottom" motto reigns supreme.

tickhound's picture

Luckily for you, not much profit yet in magnetic bearings.  Not enough manipulated scarcity available.  Too re-use-able.  Like a watermelon seed. 

But forward profit says the saddle maker. 

Here's to stunted tech, human labor, and waste.  Cheers.

ekm's picture

Anything and anything that looks too too too too stupid, is done on purpose.

disabledvet's picture

oh, that's right. "cougar woman" said this would happen to the dollar not the yen. "this has been Government business from the beginning." the Japanese Emperor doesn't just come out and "say things." needless to say Texas is doing the two step as well. "whispering death" they called that plane. God help them if this is the "quiet loss of all liquidity" that precedes those yields from going parabolic and the yen collapsing. there were stories vis a vis Weimar and...

tango's picture

High yields can effectively be eliminated through central banks purchasing the vast majority of debt. Yes, it's crazy but it's also why with all our fiscal and monetary problems, yields are hovering at historical lows despite endless predictions of a meteoric rise.  I am not saying they won't rise but it won't be like the past when folks actually knew that money created on a computer had no intrinsic value.

lolmao500's picture

But but but! Yen carry trade is all that matters... who cares if Japan is fucked for 50 more years if the worldwide scam can last one more day?? TOTALLY WORTH IT.

Japan is just a pawn...

Japan is fucked... within 5 years they have what... $6 trillion of debt due? Yeah they are screwed.

nomorebuyins's picture

All of the smart money is long Nikkei, they say it will take years to turn south. I thought contrarians usually make money in these situations. I guess Cramer will have to use his "we could not have predicted this one" quote again. Like when he told us to buy Bear Sterns and guaranteed they would not go out of business. What a Dickhead!

terex's picture

#They# cant be that smart if they dont understand a parabolic move and whats on top  - tip: it aint sugar but for some of us it will be sweeeet **kisses**

stant's picture

so we got 2 more years here in the states while the rest of the world goes to hell. whoopee

nomorebuyins's picture

2 years? 6 months a gallon of milk will be 6-7 bucks. Real inflation, and it will get worse fast!

HeliBen's picture

US can help here. Send some "under employed" BLS workers over. They can fix it.

ReactionToClosedMinds's picture

been in Wisdom Tree's  'lucky' JPY hedged DXJ ... maybe time for an earlier than planned exit

dunce's picture

In the words of a popular song "slip sliding away".

besnook's picture

japan still has a few dollars left. what else are they good for?

nathan1234's picture


I wonder how much of the US Dollar reserves that were accquired by Japan -what was the Yen - Dollar rate for this accquisition. And a possible average.

I guess Japan needs to offload these dollars. Maybe the yen printing is now the reverse action.

It's time the US Treasury bond sale takes place.

China first or Japan first !!!




Shevva's picture


Suggests "Economy Has Started Picking Up"'

Thats handy because Carney says the UK needs to be like Japan.

kurzdump's picture

Is Japan becoming the new U.S.?

css1971's picture

"Pick up" has now been redefined as "not declining quite as quickly".

Gotta love these 1st, 2nd and 3rd order derivative distinctions. And of course random noise is not a huge problem when you're measuring changes in rates of change.

thisandthat's picture

Portuguese prime-minister's father:

"This is beyond repair. Give it up."

"The retired doctor [...] never wanted to see his son in the meanders of politics: 'We never liked him going where he went, because the idea here at home, in the family, is this is not fixable. For many years, not just now.'"

Use Google or Bing Translate, for a laughter...

NipponMarketBlog's picture



Looks like the Japanese government is going to have to turn to foreign investors if they want to sell more JGB from now on....

One World Mafia's picture

"Of course, there are green shoots - CPI is not deflating as fast as it was... and 'some' inflation expectations are rising"

Sarcasm I hope.

MrNude's picture

The Japs are done as a race and are printing and partying like it's 1999.

They won't be around by the end of this century in any form of meaningful context.

Just a few handfuls scattered about. While I do feel sorry for them, they have walked off the cliff completely on their own accord.


Headbanger's picture

I think they devolve back to being the feudalistic society they were for centuries before lead by shoguns killing each other.

Just like Europe and America will too!

ali-ali-al-qomfri's picture

Headbanger ++ you have thee best picture and most fitting to the comments section as well!

Infact the chart shows a similar progression that your picture also does, so this won't end well.


gatorengineer's picture

Japs are restarting their nukes.... to cut the trade deficit, they have to get off of imported coal and nat gas......

The thing to watch will they get real inflaction where wages go up, or just stagflation (like we have).....


Goldbugger's picture

Japan is in denial. They are even planting rice in radiated areas.