What the Indicator Shows
When exports exceed imports, the result is called a trade surplus; when imports exceed exports, it is called a trade deficit. Japan, which is resource-poor, can see its trade balance swing widely with changes in energy prices and exchange rates, and the balance is used as one indicator for gauging the country's overall external trading activity.
Relationship to the Markets
The trade balance is considered one of the factors that can influence the exchange rate, but exchange rates are shaped by many factors — interest rate differentials, capital flows, and market sentiment among them — so the future direction of the exchange rate cannot be determined from the trade balance result alone.