Japanese exports have disappointed expectations for 6 of the last 7 months. June saw exports drop 2.0% (versus an expectation of a rise of 1.0%). This is the first consecutive month drop in exports since Dec 2012 (before Abenomics was unleashed). Despite eysterday's incessant bullshit from various BoJ member about the economy being on track for receovery etc. the adjusted trade balane has now been in deficit for 39 months in a row with June's unadjusted trade-deficit dramatically worse than expected at JPY822billion. For a sense of how much this disaster means to markets that have become so numbed thanks to central bank intervention, USDJPY fell 2 pips on the news... it's not the economy, stupid; it's the BoJ.
We leave it to none other than Goldman (who some may remember had banked on a J-Curve arriving in the middle of last year just as the textbooks said it would) to explain just how bad today's data really is...
Trade balance to remain in the red, sluggish export volume becoming an increasingly serious issue: 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. There were some commentators who viewed that export volume was weak in January-March as manufacturers allocated the portion of products scheduled for exports for domestic use in response to the pre-tax-hike rush demand, and therefore expected a rebound from April. However, such view was apparently misleading.