Mitsubishi UFJ: Japan’s first trade surplus in nearly two years is expected to support the yen

MUFG said Japan’s shift to a trade surplus over time would be a “key” factor supporting the yen‘s exchange rate.

Earlier this week, Japan released data showing the country posted its first trade surplus since October 2021 and its largest since July 2021.

“The fading of the negative shock to energy prices is a crucial fundamental shift for the yen,” said Derek Halpenny, head of global market research at MUFG Europe.

As Japan relies mostly on imports for its energy supply, soaring energy prices last year put pressure on the yen exchange rate and Japan’s current account, but after a sharp decline in natural gas imports, the corresponding pressure no longer exists, which means that the dollar may have room to rise further against the yen limited.