Japan’s exports experienced an upswing in January, propelled by robust automobile exports to the United States, although the shadow of potential new tariffs looms. Data from the Finance Ministry reveals that total exports in January increased by 7.2% compared to the same period last year. This figure, while positive, is slightly below the median market forecast of a 7.9% increase, and comes after a 2.8% rise recorded in December.
The increase in exports was largely attributed to healthy auto sales to the U.S., coupled with a weaker yen, which effectively increased the value of exports. Exports to the U.S. specifically saw an 8.1% rise. However, exports to China experienced a 6.2% dip, primarily due to a decline in shipments of chip-making equipment, while exports to Europe also fell by 15.1%. Transportation equipment, which is the largest export category, showed solid growth of 12%, with motor vehicle exports increasing by 10.5% and ship exports surging by 106.9%.
Despite the overall export growth, Japan recorded a trade deficit of 2.759 trillion yen ($18.16 billion), in contrast to a forecast deficit of 2.1 trillion yen. Imports grew significantly, rising by 16.7% in January compared to the previous year, exceeding market forecasts of a 9.7% increase. This surge in imports was fuelled by increased demand for machinery, computers, and food items, a situation exacerbated by the depreciating yen.
Growing concerns surround potential tariffs from the U.S.. The U.S. President has suggested tariffs of around 25% on U.S. auto imports, a move that could significantly impact Japan’s export-driven economy. The U.S. is Japan’s largest export destination, accounting for a fifth of its total shipments valued at $700 billion, and automobiles represent a substantial 28% of U.S.-bound exports. These tariffs may require major automakers, including companies like Toyota Motor and Honda Motor, to reassess and adjust their global production strategies.
Japan is actively seeking an exemption from the proposed U.S. tariffs, including those on steel and aluminium. Japan’s Chief Cabinet Secretary Yoshimasa Hayashi has stated that the government is closely monitoring the potential impact of these higher levies and will take appropriate action in response.
