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Japan’s exports grew for the fourth straight month in January, signaling a resilient economic recovery despite looming U.S. tariff threats. Data released Wednesday showed a 7.2% year-on-year increase, slightly below the 7.9% market forecast, but a strong improvement from December’s 2.8% rise.
Exports to China declined 6.2%, while shipments to the U.S. rose 8.1%, highlighting shifting trade dynamics. Imports surged 16.7%, exceeding the expected 9.7% rise, leading to a trade deficit of 2.759 trillion yen ($18.16 billion), wider than the projected 2.1 trillion yen shortfall.
The latest trade report follows robust GDP data, which showed faster-than-expected growth in Q4, bolstering expectations for continued interest rate hikes by the Bank of Japan. However, uncertainty looms as President Donald Trump considers imposing a 25% tariff on imported cars and retaliatory duties on countries taxing U.S. imports.
Japan, heavily reliant on exports, faces risks as the U.S. remains its largest trading partner, accounting for a fifth of total exports valued at $700 billion. While Japan maintains one of the lowest average tariff rates globally, its non-tariff barriers, such as automobile safety regulations, may face heightened scrutiny.
Automobiles remain a key sector, comprising 28% of U.S.-bound Japanese exports. Meanwhile, Trump has pressed Prime Minister Shigeru Ishiba to address Japan’s $68.5 billion trade surplus with the U.S.
Despite strong exports driving economic growth, analysts caution that rising inflation in food and essential goods could weigh on consumer spending, potentially slowing recovery momentum.
Japan led foreign direct investment in the U.S. in 2023, with $783.3 billion, surpassing Canada and Germany, according to U.S. Commerce Department data.
