Yen In Focus Ahead of Rate Decisions, Japan's Trade Deficit Shrinks In November

Akira Ito
18 Dec, 2024
Tokyo

Market sentiment in Tokyo was negative amid domestic monetary policy uncertainty and rising trade tensions with the U.S. 

The Nikkei 225 stock average declined 0.5%, and the Topix index fell 0.1% ahead of the Bank of Japan's rate decisions on Thursday. 

The Bank of Japan is likely to postpone its rate hike in 2025 as policymakers await more signals on wage growth at small- and mid-sized firms. 

SMEs have been reluctant to match 5.1% wage hikes at large corporations in 2024, amid weak profit outlook and persistent challenges in the domestic economy. 

Small and mid-sized enterprises spend about 70% of their profit on wages, significantly higher than 40% at large and international corporations, according to a September quarter corporate survey released by the finance ministry in early December. 

The yen held firm at 143.05 against the U.S. dollar ahead of the U.S. Federal Reserve's rate decisions later today. 

The U.S. Fed is widely expected to lower its fed funds rate range by 25 basis points, and the central bank is likely to announce fewer possible rate cuts in 2025 amid a resurgent inflation. 

The BoJ's possible rate hike and additional interest rate cuts by the Federal Reserve in 2025 are expected to narrow the rate differential between the U.S. and Japan. 

 

Japan's Trade Deficit Unexpectedly Shrank In November

Japan's trade deficit unexpectedly shrank in November after exports rose and imports declined. 

Japan's exports in November rose 3.8% to 9.15 trillion yen, and imports eased 3.9% to 9.32 trillion yen, resulting in a trade deficit of 117.6 billion yen, according to data available from the ministry of finance. 

Exports expanded for the third consecutive month and advanced from a 3.1% increase in October and a decline of 1.7% in September. 

Exports to China rose 8.9%, to Taiwan advanced 19.8%, to India jumped 9.8%, and to South Korea advanced 5.0%. 

Shipments to the ASEAN region advanced 5.5%. 

However, exports to the U.S. fell 8%, to Germany declined 11.8%, and to the European Union dropped 12.5%. 

Japan recorded a trade deficit in nine of the eleven months in 2024, as the price of imported energy products stays elevated and growth in exports remains anemic. 

 

Japan Stock Movers 

The Nikkei 225 Stock Average decreased 0.5% to 39,179.01, and the broader Topix index declined 0.1% to 2,725.44. 

Tech stocks in Tokyo headed lower for the second day in a row, tracking losses in overnight trading in New York. 

Advantest Corp. decreased 0.5% to ¥8,670, Tokyo Electron declined 0.3% to ¥23,850, and Screen Holdings edged up 0.2% to ¥9,239. 

Seven & I Holdings Co. Ltd. declined 0.6% to ¥2,499, Isetan Mitsukoshi fell 1.2% to ¥2,338, and Fast Retailing Co. Ltd. dropped 1.3% to ¥52,720. 

Marubeni Corp. declined 0.2% to ¥2,239.50, Itochu Corp. edged up 0.1% to ¥7,657, and Mitsui & Co. eased 0.8% to ¥3,186.