Japanese Exports Rise Amid Trade Concerns

By Makiko Yamazaki
TOKYO (Reuters) – Japanese exports rose for a third successive month in December, boosted by a weak yen, according to data released on Thursday. However, a decline in volume raises doubts about future prospects affected by U.S. trade policy unpredictability.

Concerns escalated as U.S. President Donald Trump indicated intentions to impose tariffs on imports from trading partners, including China, Canada, and Mexico. This has heightened anxieties among Japanese firms, fearing that protectionist measures could hinder global shipments.

Companies with operations in the U.S. are preparing to increase their presence there, potentially impacting Japan’s export levels. Additionally, exports to China face challenges due to worsening U.S. restrictions on business engagements.

Takeshi Minami, chief economist at Norinchukin Research Institute, commented, “As Trump’s tariffs and potential retaliatory measures could upend international trade, we just need to wait and see what will happen.”

Data revealed that Japan’s December exports increased by 2.8% compared to the same month in the previous year, surpassing a median forecast of 2.3% but slowing from November’s 3.8% rise. The demand for chipmaking equipment in Taiwan led the exports, while the yen’s 3.8% depreciation against the U.S. dollar augmented the overall value.

Conversely, exports to Japan’s largest trading partners, including China and the United States, declined by 3% and 2.1%, respectively. Meanwhile, December imports rose by 1.8% year-on-year, contrasting a forecast of 2.6% and a decline of 3.8% in November.

Japan registered a December trade surplus of 130.9 billion yen ($836.80 million), exceeding expectations of a 53 billion yen deficit. However, Japan experienced its fourth consecutive annual deficit, totaling 5.3 trillion yen, down from a previous deficit of 9.5 trillion yen. Annual exports rose by 6.2%, while imports increased by 1.8%.

The potential for sustained wage growth and increased consumption may support a case for the Bank of Japan to raise its policy interest rate soon. However, Trump’s tariff plans cloud the outlook for external demand, potentially hindering international trade and slowing China’s economic recovery.

A survey by the Japan External Trade Organization revealed that numerous Japanese firms with U.S. operations are preparing for tariffs by enhancing U.S. manufacturing, procurement strategies, and implementing price hikes. Nevertheless, significant tariff effects are unlikely in the first half of the year as necessary regulatory processes are time-consuming, noted Daiwa Institute of Research economist Koki Akimoto.

“Japan’s exports are likely to stay flat for a while,” Akimoto predicted.

($1 = 156.4300 yen)