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Investing.com-- Japan’s trade balance shrank less than expected in August, aided chiefly by better-than-expected exports as the finalization of a Tokyo-Washington trade deal offered exporters some clarity.
But local demand remained weak, with Japanese imports shrinking far more than expected.
Japan’s trade balance showed a deficit of 242.5 billion yen ($1.66 billion), smaller than expectations for a deficit of 513.6 billion yen, government data showed on Wednesday. But the trade deficit did widen sharply from a 118.4 billion yen deficit in the prior month.
Exports shrank less than expected– 0.1%, against forecasts for a drop of 1.9%, while also improving from a 2.6% drop in the prior month.
The improvement in exports came as the U.S. and Japan finalized the terms of a trade deal in August, which will limit U.S. tariffs on Japanese exports to a 15% levy. The deal offered Japanese companies clarity on their sales to the U.S., with the 15% tariff also being lower than the 25% levy Washington had initially outlined.
But overall exports shrank, given that the 15% tariff still weighed on demand. Outside the U.S., demand in major markets such as China and Europe also remained languid.
Japanese domestic demand remained on the backfoot amid high import prices and sticky inflation in the country. Imports shrank 5.2%, more than expectations for a 4.2% drop but better than the 7.4% decline seen in the prior month.
The trade data comes just days before a Bank of Japan meeting, where the central bank is widely expected to leave interest rates unchanged.