Japan seems to be happy over surge in exports to the US amid slowing demand from China during 2015. But, latest Yen strengthening is diluting value of foreign trade. Though, Japan's exports eased in February, value was almost flat owing to surging Yen against the US dollar. Overall exports volume was flat, while value declined over four percent owing to rising Yen.

The outlook for Japan's exports looks gloomy as exports to the US fell for the 10th consecutive month. Exports to the US from Japan dropped 3.2 percent in February, however value rose 0.2 percent. Japan's value of exports to China on the other hand, which is largest trading partner of the world's third largest economy, rose 5.1 percent and volume declined 15.6 percent.   

Bloomberg reports that Japan's Finance Ministry is pricing exports in Yen. Lunar New Year began from 8th of February causing the slowing down of exports to China and other Asian nations in late January. This resulted in gains in February when compared with previous corresponding period. Japan's overall volumes were flat and value fell four percent because of Yen rising.

Atsushi Takeda, an economist at Itochu Corp. in Tokyo, said "The tailwind from the weak Yen has gone. We can't help, but hold a pessimistic view on the outlook for exports before the figures were released. Domestic demand won't be dependable at all, and the same goes for exports. I can't deny the possibility of another economic contraction this quarter."

Yahoo Finance further adds that Japan recorded the biggest trade surplus in February over four years. The strengthening of Yen and weaker oil prices were the main reasons. Japan registered Yen242.8 billion ($2.2 billion) surplus in February 2016 from a deficit of Yen426 billion in the previous corresponding period and a deficit of Yen 648.8 billion in January. This was biggest surplus since September 2011. 

Nobuyasu Atago, the chief economist at Okasan Securities Co. and a former Bank of Japan official, said "The lack of a boost from exports raises a risk of Japan's contraction this quarter. It's becoming clearer that the weakness of the global economy is taking a toll on Japan's economy."

With Yen strengthening against the US dollar, exports value may be under pressure, but it's for a short period only, opine some economists. At the same time,  the country can't depend upon domestic demand totally, they cautioned. Economists forecast there would be further fall in GDP during first quarter of 2016, as reported by ForexLive.

Last quarter of 2015 was gloomy for Japan's economy as it shrunk for five quarters in a row. Ever since Shinzo Abe became the Prime Minister of Japan in December 2012, Japan's economy has been witnessing turbulent conditions, while Abe is implementing several economic reforms. The gross domestic product (GDP) declined 1.1 percent on annualized basis as private consumption dropped significantly.