Japan: Merchandise exports decelerate in February amid Lunar New Year
Latest reading: In February, the trade balance was JPY +0.1 trillion, up from the prior month’s JPY -1.2 trillion. The market had expected another trade deficit. Over the last 12 months, the trade balance summed to JPY -1.8 trillion.
Yen-denominated exports were up 4.2% in year-on-year terms in February, down from January’s 16.8%. The January and February readings were distorted by the later timing of the Lunar New Year this year vs last, with Japanese shipments to China surging in January before plunging in February. Regardless, over January–February as a whole, Japanese exports rose 10.5% annually, the strongest increase in a year. Less positively, in February, shipments to the U.S. declined for the 11th month running, with car shipments tanking.
Finally, yen-denominated imports increased 10.2% yoy in February, coming on the back of a 2.6% decrease in the previous month and the fastest uptick since January 2025.
Outlook: Our panelists project that the growth of Japan’s exports of goods and services will slow in 2026 to the lowest since the pandemic-induced downturn of 2020, weighed on by higher U.S. tariffs.
Regarding the impact of the Iran war on Japan’s trade balance, surging fuel prices are likely to stoke Japan’s import bill, which is already being weighed on by a record-weak yen.
Panelist insight: Nomura’s Yuki Ito and Kyohei Morita commented:
“Looking at the Jan–Feb average to smooth out the impact of the Lunar New Year holidays, we estimate that real goods exports were up 2.3% and real goods imports were up 2.5% compared to the Oct–Dec 2025 average. When considering January services trade data as well, we estimate that external demand (net exports = exports – imports) in Jan–Mar is trending in a direction that will boost real GDP during the same period, which aligns with our forecasts.”