Japan: Exports growth surges to nine-month high ahead of U.S. tariffs
Latest reading: Yen-denominated merchandise exports increased 11.4% year on year in February. The print, despite slightly undershooting market expectations, was up from January’s 7.3% rise and marked the best result in nine months. The threat of U.S. tariffs continued to boost Japanese exports by encouraging firms to front-load shipments: Exports to the U.S. rose 10.5%. A lower base of year-on-year comparison created by this year’s later timing of the Lunar New Year also bolstered exports to China, which increased 14.1%. In contrast, shipments to Europe fell by 7.7%.
Meanwhile, yen-denominated merchandise imports declined 0.7% in February, flipping from January’s 16.3% rise, with imports of petroleum shrinking by double digits amid lower prices on global markets.
Overall, the yen-denominated merchandise trade balance improved from the previous month, recording a JPY 0.6 trillion surplus in February, compared to a JPY 2.7 trillion deficit in January and marking the best result since March 2021.
Outlook: From 12 March, the U.S. imposed tariffs on imports of aluminium and steel, and announced further ones on automobiles later in the month. On 2 April, the U.S. is set to unveil a set of reciprocal tariffs; at 3.2%, Japan’s average tariff rate on U.S. imports is double that the U.S. imposes on Japan. These factors are likely to dampen the growth of Japanese exports later this year. Nonetheless, the front-loading of shipments will lead net exports to rise for the second consecutive quarter in Q1 2025, according to our panelists. Over 2025 as a whole, Japanese exports are forecast to increase more than twice as quickly as in 2024, bolstered by higher global demand for IT products, one of Japan’s top export categories.
Panelist insight: Commenting on the outlook, Nomura’s Yuki Ito and Kyohei Morita said:
“Even taking into account the weakness of service exports in January, we maintain our view that economic recovery will be supported by external demand in Jan–Mar.”