JPY Drops, Nikkei Pops As Japanese Trade Balance Nears Record Deficit (36th In A Row)

Tyler Durden's picture

Another month, another colossal miss for the "waiting-for-the-j-curve" Japanese trade balance. At 1.7tn, this month's adjusted trade balance is the 2nd largest on record, and is the 36th month in a row - the worst March deficit ever. Exports missed dramatically (+1.8% vs 6.5% expected) so, so much for devaluation driving competitiveness in a globally interdependent product development cycle - nearly the lowest YoY gain in exports since Abenomics began. Imports rose more than expected (+18.1% vs 16.2%) as the devalued JPY makes living standards more difficult to maintain. The result of this dismal data - JPY weakness which can mean only one thing - a 120 point rally in the Nikkei.


Export growth is collapsing... as imports surge as a devalued JPY makes the picture for importing everything uglier and uglier... (as Goldman notes, growth in the import value of mineral fuels such as crude oil and LNG re-accelerated to +14.8% in March (February: +4.2%))



Which leaves the trade deficit near record lows for the 36th month in a row...


As we have noted previously, the J-Curve ain't coming...

On the terrible missing J-Curve (via Patrick Barron of the Ludwig von Mises Institute of Canada):

Perhaps I can shed some light on Japanese Prime Minister Abe’s missing J-curve; i.e., why Japan’s trade deficit seems to be increasing rather than decreasing after massive monetary intervention to reduce the purchasing power of the yen. Monetary debasement does NOT result in an economic recovery, because no nation can force another to pay for its recovery.


Monetary debasement transfers wealth within an economy by subsidizing exports at the expense of the entire economy, but this effect is delayed as the new money works it way from first receivers of the new money to later receivers. The BOJ gives more yen to buyers using dollars, euros, and other currencies, as the article states, but this is nothing more than a gift to foreigners that is funneled through exporters. Because exporters are the first receivers of the new money, they buy resources at existing prices and make large profits. As most have noted, exporters have seen a surge in their share prices, but this is exactly what one should expect when government taxes all to give to the few.


Eventually the monetary debasement raises all costs and this initial benefit to exporters vanishes. Then the country is left with a depleted capital base and a higher price level. What a great policy!


The good news is that Japan does know how to rebuild its economy. It did it the old-fashioned way seventy years ago–hard work and savings.

And the latest joke from Asian trading floors: "when asked what he thought of the recovery, Shinzo Abe responded "Depends!""


The result...


Worst news is awesome news... well played BoJ... Of course, Abe needs that stock market higher...


As its clear the people are losing faith in his magic

And then Goldman Sachs gives up the J-Curve...

Trade balance to remain in the red, significant delay in J curve effect: We expect the trade balance to remain in the red in the long term. We see a gradual improvement over time in line with recovery in the US economy and elsewhere, but with the boost to export volumes from yen depreciation weakening and structural changes evident in imports, including higher electrical machinery imports, we believe the pace of that improvement will be far more modest than in past periods of yen weakness.

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knukles's picture

Need to increase the import of monosodiumglutimate

LetThemEatRand's picture

North Korea has Rodman, Japan has Kobe.  Jump ball, fishez.

ArkansasAngie's picture

So ... everybody is assuming that the Japanese printing presses are going to be running full bore. And ... if they don't? The fed did politely ask them not to do so per mike Whitney

LetThemEatRand's picture

When all else fails, start rebuilding your military.

yogibear's picture

US follows Japan down the debt spiral rat hole.

Oracle 911's picture

It is the opposite. But who cares?

The result is what matters and probably ability to produce something other than paper promises, too.

TheRideNeverEnds's picture

Mind numbingly bullish!

fonzannoon's picture

THe 10yr JGB is off 1bp from 0.60 to 0.61. Rejoice Kyle Bass.

Scarlett's picture

Just a matter of time now

knukles's picture

Full ride welfare is better

Notsobadwlad's picture

I remember in the 1980s when the Japanese thought they were God's gift to business. They were all geniuses ... and we were all supposed to emulate the transformation that Demming started in them.

Now, it is clear that their business genius (not knocking their technology, mind you) was based on cheap labor (which later became expensive) and financing based on the market value of assest (in an quickly inflating economy ... sound familiar). When asset prices topped and started to tank in the early 90s very soon they had too little collateral for the amount of debt they had taken on.

Their answer has been austerity (Europe style) and 20 years of slow decline... thanks mainly to the 4 tigers,then China replacing them as "the" manufacturing hub.

Without manufacturing exports or their own natural resources Japan is doomed to have deficits until they can have no more. China at least has resources ... although not enough to supply themselves and the world.

Unknown Poster's picture

Expecting CBs to fix a country's problems is pretty shaky. All that the CB has in its vaunted toolbox is a printer and a condom. If the can't fix it with the printer, then fuck it.

starman's picture

Hm I swear I know another country like it.

Wait What's picture

Abenomics isn't working?! after 8 episodes of JapaneQE, who coulda knowd?

Oldwood's picture

Everyone trying to beat America at our own game and driving us all to hell.

Hindenburg...Oh Man's picture

The narrative again is completely bullish, even as the economy flounders. bad news? bullish! geopolitical unrest? well, we've proven that it should be ignored. Fed-speak? Always good news. Basically with money printing in full force, we are on track to see more market highs. I might consider a short position if we hit toward 4400 on the NASDAQ again...

AdvancingTime's picture

When the yen drops faster than the Japaneses stock market rises it will no longer protect the wealth of those invested within its borders. Japan is the most indebted developed country in the world and its future prospects are dim and getting worse. It is only a matter of time before the yen becomes worthless and as inflation begins to take root it will place upward pressure on Japanese bond yields and raise the cost of government to service its massive debt.

With the BOJ  set to absorb half of the government bonds planned for sale this fiscal year, domestic investors have already started venturing overseas for higher yielding assets. If this turns in to a tsunami of  money fleeing Japan it will constitute the end of the line for those holding both JGBs and the yen. More on this subject below,

kchrisc's picture

Like laying landmines with ones back to a cliff--Jump or tip-toe.

Bernoulli's picture

I wonder when people will start to change their mind about any further central bank action anywhere in the world being good news. Maybe soon? And then it will be fun to watch. For example Draghi trying to do "whatever it takes"...

Oh and on a completely unrelated subject: USD-CNY also looks interesting today...'s picture

They took a small break from the de-valuation, it has continued now. 

I_Am_'s picture

And now this for fun:

Shanghai court detains MOL ship in WW2 compensation dispute

Shanghai: Shanghai Maritime Court ordered the detention of a bulker "Baosteel Emotion" owned by Mitsui OSK Lines (MOL) at Majishan port in Shengsi, Zhejiang Province to enforce a compensation ruling for the loss of two Chinese cargo ships during the Second World War. MOL rented two cargo ships "Shun Feng" and "Xin Taiping" from Chung Wei Steamship Company, owned by Chinese shipowner Chen Shuntong in the 1930s and MOL stopped paying rent for the two ships after 1937 when Japan declared war on China and never returned the two ships.


Chen's family has been seeking compensation since the war. The case was reopened in 1988 when Chen's grandsons filed a lawsuite at Shanghai Maritime Court. The court in 2007 judged the two ships illegally possessed by the Japanese company after its suspension of rent payments in 1937 and ruled Mitsui Group to pay 2.9bn yen compensation. The Supreme People's Court rejected the Mitsui Group's appeal in 2010. Shanghai Maritime Court sent an enforcement notice to Mitsui in late 2011 but negotiations between the Chens and Mitsui ended with no result, prompting the court to seize Baosteel Emotion on Saturday.

It was the first time China has seized Japanese corporate property for postwar compensation. [21/04/14] Sino Ship News

eddiebe's picture

The US has been draining and manipulating Japan for the last 40 years. 

Yancey Ward's picture

Clearly, Japan needs to drive the Yen down to zero so that its exports can be given away in order to get a trade surplus.