Japan’s Export Growth Masks Underlying Uncertainty
A Weak Yen Boosts Shipments, But Volume Decline Raises Concerns
Japan’s exports have risen for the third consecutive month, driven by a weak yen that has increased the value of shipments. However, a decline in volume has sparked concerns about the country’s trade outlook, which is clouded by the unpredictability of U.S. trade policy.
U.S. Trade Policy Casts a Shadow
Japanese companies are increasingly worried about the impact of protectionist policies on global shipments. With U.S. President Donald Trump planning to impose tariffs on imports from major trading partners, including China, Canada, and Mexico, companies are preparing for the worst. Some are even considering boosting operations in the U.S. to mitigate the impact, which could ultimately hurt Japan’s exports.
Exports to China Face Uncertainty
Meanwhile, exports to China are at the mercy of tightening U.S. restrictions on doing business with Asia’s largest economy. The uncertainty surrounding international trade has led economists to caution against making predictions. “We just need to wait and see what will happen,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
December Export Figures
Japan’s December exports rose 2.8% from the same month a year earlier, exceeding market forecasts. Demand for chipmaking equipment in Taiwan led the way, while the yen’s 3.8% drop versus the U.S. dollar boosted the total value. However, exports to Japan’s two largest trading partners fell, by 3% to China and 2.1% to the United States.
Trade Surplus and Annual Deficit
December imports rose 1.8% on year, resulting in a trade surplus of 130.9 billion yen ($836.80 million). Japan logged a fourth successive annual deficit, at 5.3 trillion yen versus the previous year’s 9.5 trillion yen. Annual exports rose 6.2%, while imports rose 1.8%.
Outlook for External Demand
While signs of sustained wage growth and consumption are likely to support the case for the Bank of Japan to raise its policy interest rate, the outlook for external demand is clouded by Trump’s tariff plans. A survey by the Japan External Trade Organization showed most Japanese companies with U.S. operations are preparing for tariffs through efforts such as strengthening U.S. manufacturing and procurement and product price hikes.
Tariff Impact Unlikely in First Half
However, any major tariff impact is unlikely in the first half of the year, as regulatory processes needed to implement changes take time. “Japan’s exports are likely to stay flat for a while,” said Daiwa Institute of Research economist Koki Akimoto. As the trade landscape continues to evolve, Japan’s export growth masks underlying uncertainty about the future of international trade.
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