Mixed outcome: A shopper looks at items at a discount store in Tokyo. Japan’s trade surplus with the United States has dropped by 12.6% to US$47.5bil while its trade deficit with China has stayed steady at around US$50bil. — Reuters
Tokyo: Japan’s exports managed to rise last year despite the first fall in shipments to the United States since the pandemic, in a year that was roiled by tariffs from President Donald Trump.
Overall exports gained 3.1% last year from the previous year, led by electronic parts and food, the Finance Ministry reported yesterday.
While exports to Europe and Asia excluding China remained solid, shipments to the United States fell 4.1% led by cars and chip-making machinery, marking the worst decline since 2016 excluding the impact from the pandemic. Shipments to China declined 0.4%.
On a monthly basis, Japan’s exports rose for a fourth consecutive month in December as Chinese demand held steady despite an ongoing diplomatic dispute that began last year. But shipments to the United States dropped, led by cars.
“Exports are growing overall, led by semiconductors, but I believe this growth may not be sustainable,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “Geopolitical risks are increasing, and US consumption is also expected to slow.”
While yesterday’s trade data painted a mixed picture pointing to risks ahead, it will likely keep the central bank on its gradual path of further rate hikes.
The Bank of Japan is widely expected to stand pat today after raising the benchmark interest rate in December. The central bank has signalled that it will keep raising rates as long as prices and growth develop in line with its projections.
Japan also maintained a trade surplus with the United States last year despite Trump’s campaign to rebalance the gap with tariffs. Tokyo recorded a 7.52 trillion yen or about US$47.5bil surplus with the United States – 12.6% smaller than the surplus in 2024.
Last year Japan secured a cut in US car tariffs through months of trade negotiations and avoided the threat of steeper levies on other goods by promising to boost investment in the United States.
Trump retains the authority to raise tariffs again should Japan fail to fund investment projects of his choosing.
“The possibility remains that Trump could impose new tariff policies or exchange rate policies against Japan”, given the persisting trade balance gap, said Minami.
Global merchandise trade slowed in the three months through last September as the boost seen earlier last year from front-loading of orders ahead of US tariffs faded, the World Trade Organization (WTO) said in November.
The WTO’s goods barometer dropped to 101.8 in September from 102.2 for June.
“Exports to the United States were strong last October and November, but I think this was a recovery in the wake of tariff policies, and that effect has now run its course,” said Minami. “After all, auto sales in the United States are not strong.”
Including trade with other nations, Japan’s overall trade balance last year was in the red with a 2.65 trillion yen deficit, largely due to Japan’s trade with China.
The country was Japan’s biggest trading partner followed by the United States, and Tokyo ran a 7.91 trillion yen deficit with Beijing.
Whether Japan’s trade with China holds up has been a key question since a diplomatic dispute began last year following Prime Minister Sanae Takaichi’s controversial remarks on Taiwan last November.
This month, China announced fresh export curbs on dual-use items and an anti-dumping probe into a key chipmaking material.
A government travel warning has led to a slide in the number of Chinese visitors to Japan.
Overall exports gained 5.1% last December from a year earlier, sustained by demand from Europe and Asia including China, according to the Finance Ministry.
That missed the median analyst forecast of a 6.1% rise, with shipments to the United States falling 11.1%.
“I don’t think China can afford to destroy ties with Japan. Doing so would worsen employment conditions domestically and heighten criticism of the Chinese government,” said Minami. — Bloomberg
