Taking a Fundamental Approach to Forex Trading

Trading the Yen with Japan Trade Balance

Japan trade balance is an important economic indicator released monthly in Tokyo the Ministry of Finance. Calculated in billions of Yens, this piece of date represents the difference between the net value of exports and the net value of imports in Japan for a given of months. When the value of exports exceeds the value of imports, a trade surplus is created; and when the value of imports exceeds the value of exports, a trade deficit is created.

Japan Main Exports Commodities	Japan Main Exports Partners
Transport equipment	US 22.8%
Motor vehicle	China 14.3%
Semi-conductors	S. Korea 7.8%
Electrical machinery	Taiwan 6.8%
Chemicals	Hong Kong 5.6%

Japan Main Exports Commodities	Japan Main Exports Partners
Machinery equipment	China 20.5%
Fuels	US 12%
Food stuff	Saudi Arabia 6.4%
Chemicals	UAE 5.5%
Textiles	Australia 4.8%

Impact on the Yen
Given the fact that Japan is the second largest economy, the second largest exporter of manufactured goods, and the biggest in terms of the international financial assets, its trade balance tends to move the financial markets. The very first financial instrument that comes under the influence of the Japanese trade balance is the Yen. But with the exports oriented nature of the Japanese economy, trade surplus becomes a normal scenario. For that, currency traders shouldn't focus o the absolute value of the trade balance. But rather they should analyze the monthly and annual percent of change. In the short term, positive change would appreciate the value of the yen; while negative change would depreciate it.