Trade balance means that a country's total foreign trade import and export volume tends to be basically balanced in a specific year.
Looking at the practice of foreign trade policies of governments around the world, this phenomenon is not much. In foreign trade, a government should try its best to keep a basic balance between imports and exports, with a slight surplus, which is conducive to the healthy development of the national economy.
If a country often runs a trade deficit, national income will flow out of the country, thus weakening the national economic performance. If the government wants to improve this situation, it must devalue its own currency, because devaluation, that is, lowering the price of export commodities in disguise, can improve the competitiveness of export products.
Therefore, when the country's foreign trade deficit expands, it will weaken the country's currency and make the country's currency fall; On the contrary, when there is a foreign trade surplus, it is good for this currency. Therefore, the international trade situation is a very important factor affecting the foreign exchange rate. The trade friction between Japan and the United States fully illustrates this point. The trade deficit between the United States and Japan has occurred year after year, which has caused the deterioration of the US trade balance. In order to limit Japan's trade surplus with the United States, the United States government put pressure on Japan to force the yen to appreciate. On the other hand, the Japanese government tries its best to prevent the yen from appreciating too fast in order to maintain a favorable trade situation.