New data indicates Japan’s trade surplus is declining, which spells trouble for the recession-prone economy.  On a monthly basis, Japan’s May trade surplus was $2.7 Billion, down 68% from the previous year.  Most economists had forecasted a decline of 5-10%.  The impact of this development on Japan’s economy remains to be seen.  Japan has just begin to emerge from its 4th recession in 15 years, and is still heavily dependent on exports to drive economic growth.  Furthermore, Japan is counting on a revaluation of the Chinese Yuan to spur trade with its Asian neighbor, but there are no guarantees if and when this move will occur.  Predictably, the Yen is losing value against most major currencies, as investors weigh the implications of the trade data. Bloomberg news reports:

“People have been buying the yen because of it’s healthy surpluses, and now it looks like they’re shrinking,” said a senior HSBC currency strategist.  “I’d be skeptical of buying the yen at these levels.”

Read More: Yen Declines Against Dollar as Japan’s Trade Surplus Narrows