FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, remarks the diminishing domestic demand in the Japanese economy.

Key Quotes

"The deterioration in Japan’s trade balance has been an important negative factor for the yen. The release overnight of the latest current account report from Japan revealed that Japan’s current account surplus widened by more than expected to a seasonally adjusted JPY384.6 billion in May."

"It was the second consecutive current account surplus since the introduction of the sales tax hike in April which has temporarily hit import growth. Japan’s trade deficit narrowed by JPY276.9 billion in May as the value of imports contracted by 2.9% while the value of exports expanded by 1.5%."

"Net trade is likely to make a significant positive contribution to real GDP growth in Q2 but will be more than offset by acute weakness in domestic demand. Trade data for the first two thirds of June was also released today and revealed that imports have rebounded strongly by an annual rate of 10.3% while exports expanded by a more modest annual rate of 1.1%. The report highlights that the recent narrowing in Japan’s trade deficit is likely to prove only temporary."

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