Summary:

  • Japanese GDP was revised up, all components made a positive contribution
  • Chinese saw a massive increase in a trade surplus as exports had surged, Australian balance showed a pick-up as well
  • US President Donald Trump is expected to sign a tariff plan today, some exemptions could take place

The Asia session did not abound in larger swings in asset prices, however, there were some interesting macroeconomic readings deserving our attention. This is especially true when it comes to foreign trade but at first let us begin with Japanese GDP. The second reading for Q4 2017 saw an improvement to 0.4% qoq compared to 0.2% seen in the initial print. Quite promising numbers were revealed in case of private and public spending as well. The former grew 0.5% yoy (in line with the preliminary release) while the latter jumped to 1% yoy easily beating the first reading at 0.7% albeit falling short of expectations set at 1.3% yoy.

link do file download linkAll components contributed to growth in the last quarter of 2017. Source: Macrobond, XTB Research

Finally, GDP deflator ticked up from 0% to 0.1% in a year-over-year basis. The last figure seems to underline how far the Bank of Japan still is regarding the target being set at 2%. On that account one should not expect a retreat from loose monetary policy in the near-term despite the fairly rosy outlook for growth. In terms of GDP contributions in the past quarter one may notice that private consumption added more than 0.6pp, inventories were the second largest input bringing almost 0.6pp while investments added 0.56%. At the end let us point out that the inventories’ contribution was the highest since the second quarter of 2014 dimming the overall outlook of GDP to some extent.

link do file download linkThe USDJPY failed to break above 106.40, however, the pair appears to be far away from breaking its support placed at 105.20. A breakout of one of these levels may lead to a quicker jump but the price is expected to hover within a range until then. Source: xStation5

A possible trade war has become the hottest topic of late hence each reading about trade is closely watch especially those from China being one of the major US trading partners. The reading for February saw a trade surplus surging from $20.35 billion to $33.74 billion mainly on the back of a 44.5% yoy pick-up in exports. At the same time imports grew just 6.3% yoy. Needless to say that the data for the first two months were distorted by the Chinese New Year therefore it’s better to look at the combined numbers for both months. In this respect, exports climbed 24.4% yoy whereas imports advanced 21.7% yoy. Anyway, the Chinese trade surplus remains still at elevated levels (off the highs though) prompting Donald Trump to consider targeting the country in his tariff plan.

link do file download linkAustralian trade balance saw an increase in January after a fall registered a month ago. Source: Macrobond, XTB Research

The Australian trade data showed a significant improvement in trade alike. The country had a 1055 million AUD surplus compared to a deficit exceeding 1140 million in the last month of 2017. Admittedly the data did not move the AUD at all but it seems to be worth watching going forward given a tight trade relationship between Australia and China, which could become at stake when a China-US trade war begins.

link do file download linkThe Aussie continues climbing following the RBA decision as well as the GDP release taking place earlier this week, in line with our forecasts. Source: xStation5

At the end let us make a one remark on a Trump’s tariff plan which is expected to be sign on Thursday afternoon (NY time). What’s relevant, a plan is to include a 30-day exemption from the tariffs offered Canada and Mexico, according to Washington Post. The exemptions could be extended based on progress in renegotiating the NAFTA.