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# Explanation of Real Exports and Real Imports (Discontinued)

March 2015
Bank of Japan
Research and Statistics Department

## Basic information

Compilation section : Economic Research Division, Research and Statistics Department

Frequency of compilation : Monthly basis

Time of release : See 1-(6) below.

Method of release : Bank of Japan Internet web site

Publications : Financial and Economic Statistics Monthly

Commencement of data : January 1975

## 1. Contents

### (1) Purpose and Functions

Real Exports/Imports are derived from dividing the Export/Import Value of goods, which is compiled by the Ministry of Finance for its "Trade Statistics," by the Bank of Japan's Corporate Goods Price Index (CGPI hereafter), Export/Import Price Index in principle.

The Nominal Export/Import Value of goods varies according to changes in both its quantity and price per unit. Real Exports/Imports, which are the ratio of Export/Import Value to Export/Import Price Index, represent movements of Exports/Imports in real terms by eliminating influences from price changes.

### (2) Released Series

Seasonally-adjusted indices, with the base year as 2010, are released on a monthly basis for each of the following three series: Real Exports, Real Imports, and Real Trade Balance.

### (3) Methodology

#### A. Real Exports

First, the total value of exports is broken down into eight groups, referring to the classifications in the "Trade Statistics" compiled by the Ministry of Finance. Next, the eight series are summed up after figures in each group are deflated by the corresponding deflators. Then they are seasonally adjusted and indexed so that the annual averages of those figures in the year 2010 are equal to 100.

In principle, the Export Price Index (EPI hereafter), released by the Research and Statistics Department of the Bank of Japan, is used for export deflators. Producer Price Index (PPI hereafter) excluding consumption tax is exceptionally used in some cases where there are no corresponding deflators in the EPI.

Group classifications and the corresponding deflators are as follows:

Table : Real Exports
Group Price index used as corresponding deflators
Foodstuff PPI excluding consumption tax by Group: Food, beverages, tobacco and feedstuffs
Textile Yarn, Fabrics EPI by Group: Textiles (yen basis)
Chemicals EPI by Group: Chemicals and related products (yen basis)
Metals and Manufactures of Metals1 EPI by Group: Metals and related products (yen basis)
General Purpose, Production and Business Oriented Machinery2 EPI by Group: General purpose, production and business oriented machinery (yen basis)
Electrical Machinery EPI by Group: Electric and electronic products (yen basis)
Transport Equipment EPI by Group: Transportation equipment (yen basis)
Others3 EPI by Group: Other primary products and manufactured goods (yen basis)
1. Note 1: The export value of Iron and Steel Products, Nonferrous Metals, and Manufactures of Metals.
2. Note 2: The export value of Machinery, and Scientific and Optical Instruments.
3. Note 3: Total export value minus the export value of the groups shown above.

#### B. Real Imports

First, the total value of imports is broken down into eight groups, referring to the classifications in the "Trade Statistics" compiled by the Ministry of Finance. Next, the eight series are summed up after figures in each group are deflated by the corresponding deflators. Then they are seasonally adjusted and indexed so that the annual averages of those figures in the year 2010 are equal to 100.

The Import Price Index (IPI hereafter), released by the Research and Statistics Department of the Bank of Japan, is used for import deflators.

Group classifications and the corresponding deflators are as follows:

Table : Real Imports
Group Price index used as corresponding deflators
Foodstuff1 IPI by Group: Foodstuffs and feedstuffs (yen basis)
Textile Products2 IPI by Group: Textiles (yen basis)
Mineral Fuels IPI by Group: Petroleum, coal and natural gas (yen basis)
Chemicals IPI by Group: Chemicals and related products (yen basis)
General Purpose, Production and Business Oriented Machinery3 IPI by Group: General purpose, production and business oriented machinery and equipment (yen basis)
Electrical Machinery IPI by Group: Electric and electronic products (yen basis)
Transport Equipment IPI by Group: Transportation equipment (yen basis)
Others4 Weighted average of the following three indices using their weights in IPI:
(i) IPI by Group: Metals and related products (yen basis)
(ii) IPI by Group: Wood, lumber, and related products (yen basis)
(iii) IPI by Group: Other primary products and manufactured goods (yen basis)
1. Note 1: Up to the 2000 base IPI, Foodstuff is deflated by IPI (Reference indices) by Group: Foodstuffs and feedstuffs including fresh foods (yen basis).
2. Note 2: The import value of Textile Yarn, Fabrics, Clothing and Accessories, and Textile Fibers, their Waste.
3. Note 3: The export value of Machinery, and Scientific and Optical Instruments.
4. Note 4: Total import value minus the import value of the groups shown above.

Real Trade Balance is the difference between Real Exports and Real Imports both denominated in the 2010 price. It is indexed so that the annual average of the year 2010 is equal to 100. (The official series of Real Exports/Imports are derived from normalizing "Real Exports/Imports denominated in the 2010 price" so that their year 2010 averages are equal to 100.)

### (4) Base Year

The base year is 2010.

The X-12-ARIMA procedure is used for seasonal adjustments. Updates in seasonal adjustments take place every year around March, when retroactive revisions of the previous year's figures in the "Trade Statistics" are released. Until the next update, the seasonally-adjusted figures are calculated using expected seasonal factors. The outline of the seasonal adjustments is as follows.

• The ARIMA parts of the model are: (112) (011) for Real Exports; and (011) (011) for Real Imports.
• The reference period used for seasonal adjustment is from January 1975 to February 2015.
• The forecast using the ARIMA model is extended up to 48 months, while backcasting is not conducted.
• Trading days, holidays, and leap-year effects are adjusted by user-defined variables, which are based on the number of business days at customs clearance in Japan, etc.
• Outliers are automatically detected/adjusted in estimating regARIMA models, while level shifts and ramps are unadjusted.

### (6) Time of Release

Real Exports/Imports are released on the day the "Trade Statistics" (Preliminary and Revised) are released.

## 2. Other Instructions for Use

The base year for Real Exports/Imports is updated every five years in accordance with the revision in the base year for the Corporate Goods Price Index.

The transition to the new base Real Exports/Imports coincides with the annual update in seasonal adjustments as in 1-(5) (The last transition to the 2010 base Real Exports/Imports was in March 2013.).

Provisional figures for the Export/Import deflators are used for the period in between the timing of the updates in the base year for the CGPI and that for Real Exports/Imports. Those figures are calculated by extending the existing Export/Import deflators using monthly changes in corresponding price indices based on the revised EPI/IPI.

The Quantum Index in the "Trade Statistics," released by the Ministry of Finance, serves as an indicator similar to Real Exports/Imports. The Quantum Index is derived from dividing the Export/Import Value by the Unit Price Index (with the base year as 100). However, the Real Exports/Imports Index and the Quantum Index may show different movements, because the price indices used for deflators differ in their properties.

The CGPI, used as deflators for Real Exports/Imports, tracks prices of sample goods continuously and takes into account price changes due to quality changes and eliminates the effects of sample changes in principle. Hence, Real Exports/Imports are considered to represent real values, rather than quantity, which eliminate the effects of quality-adjusted price changes from the Exports/Imports Value. On the other hand, the Unit Price Index is a weighted average of indices for average prices of each commodity group whose size of transactions is above a certain preset level in the base year. The average prices are derived simply from dividing total values by their quantities. Hence, the Quantum Index is considered to represent the integrated trading volume by adopting the weighted average of indices of traded items (Those items cannot be summed up directly due to a variety of units). For details, see "Recent Developments of Japan's External Trade and Corporate Behavior," BOJ Reports & Research Papers, October 2007, Research and Statistics Department, Bank of Japan.

Past figures may be revised at the time when Real Exports/Imports are released, since deflators for Real Exports/Imports reflect the revisions of the CGPI.

Some caution should be taken when evaluating the level of Real Exports/Imports and therefore the Real Trade Balance: Their levels are based on base-year price indices which are used as deflators. For example, a negative value in the Real Trade Balance merely represents the relative scale between Exports and Imports both evaluated at base-year prices.