Balance of trade figures are another important facet of fundamental economic analysis. The trade balance compares exports versus imports for a given economy - sometimes the figures are broken into separate balances covering goods and services

Positive
A positive balance of trade = exports higher than imports. Exports good - money coming into an economy, a trade surplus.

Negative
The opposite of this is a trade deficit, or trade gap - more goods are being imported the exported. Imports bad - money going out an economy to pay for them.

Balance of trade has historically been a critical issue in the Japanese economy, which is heavily based on exports. The financial management of the economy is geared towards stimulating exports wherever possible - keeping the value of the Yen low, low interest rates etc. - so JPY tends to be more sensitive to good/bad balance of trade figures than other currencies - on average…

Japan is a good example of a mature economy and these always tend to run a trade surplus - other examples include Germany and Canada, (sometimes unfairly referred to as stagnant economies), running generally at a lower expectation of growth. But the strong growth economies eg. United States, Australia run regular trade deficits, simply to fuel this growth.

When it comes to pure economic theory - as usual, economists are divided. Some say that trade deficits have to be tackled as they will inevitably bring an economy down, others say it’s a necessary evil to stimulate some growth, and a few even reckon a trade deficit matters not at all…

The markets, however - and it’s always the markets we’re interested in when it comes to forex trading - will tend to go classic picture, trade surplus good, trade deficit bad.