Japanese export values rose an above-trend 7.2% on year in January (vs. consensus +10.4%) a fourth straight year-on-year rise after hitting a record high ¥9.91 trillion in December with a 2.8% gain. The increase was led by solid demand for autos and drugs as well as by a volatile factor of ships. Export volumes dipped 1.7% for the second consecutive fall amid struggling economic recovery in China and parts of Europe.

Import values marked their second straight increase, up 16.7% (vs. consensus +12.6%), following a 1.8% rise the previous month and reflecting higher purchase s of smartphones, computers and drugs as expected. Import volumes rose 8.7% for the second straight gain. Both exports and imports showed some irregular patterns, going into the lunar new year holidays in some Asian countries that began on Jan. 29.

The trade balance recorded a large deficit of ¥2,758.8 billion (¥2.76 trillion) vs. the consensus call of a ¥2,154.1 billion (¥2.15 trillion) deficit after printing its first positive figure in six months the previous month. It compares with a revised ¥132.46 billion surplus in December, a ¥1,766.5 billion (¥1.77 trillion) deficit in January 2024 and the record shortfall of ¥3,506.43 billion (¥3.51 trillion) in January 2023.

Exports to the United States, which is the largest market for Japanese exports, rose 8.1% on year after a 2.1% fall, marking their first y/y increase in six months, on solid demand for autos, metalworking machinery and engines. Some firms may have rushed shipments, fearing the Trump administration will expand its list of items that receive stiff tariffs. Shipments to the U.S. recorded their first year-on-year decline in 35 months in August 2024 (-0.7%) in payback for a high pace of recovery in 2023.

Exports to the European Union slumped 15.1% after marking its first rise in nine months (+0.5%) in December. The decrease was caused by declines in shipments of autos, auto parts and construction/mining machines.

Shipments to China, a key export market for Japanese goods, slipped 6.2% after posting the first drop in three months (-3.0%) in the prior month, led by declines in semiconductor-producing equipment, computer chips and iron/steel.

Japanese export values are forecast to post a fourth straight year-on-year rise in January, up 10.4%, after hitting a record high ¥9.91 trillion in December with a 2.8% gain. The increase is expected to be led by solid demand for ships, semiconductor-producing equipment and computer chips. Import values are expected to mark their second straight increase, up 12.6%, following a 1.8% rise the previous month and reflecting higher purchases of drugs, smartphones and computers. Both exports and imports will likely show irregular patterns, going into the lunar new year holidays in some Asian countries starting Jan. 29.

The trade balance is forecast to post a large deficit of ¥2,154.1 billion (¥2.15 trillion) after printing its first positive figure in six months. It would compare with a revised ¥132.46 billion surplus in December, a ¥1,766.5 billion (¥1.77 trillion) deficit in January 2024 and the record shortfall of ¥3,506.43 billion (¥3.51 trillion) in January 2023.

Merchandise Trade balance measures the difference between imports and exports of both tangible goods and services. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade.

Japan's merchandise trade balance measures visible trade and excludes services. Specifically it is the difference between imports of goods and exports of goods. A positive value indicates a trade surplus (exports exceed imports) while a negative value indicates a trade deficit (imports exceed exports). Movements in the trade balance reflect altered demand for Japanese exports which subsequently impact the yen's value and directly affect GDP growth because of the economy's dependence on trade.

The report gives insight into changing trends regarding Japanese trade. Such developments are especially important for Japan, which is an export-oriented economy that has historically experienced large trade surpluses and any change can have a dramatic effect on the domestic economy. Typically the headline number is the change from the previous year in yen along with the percentage change in exports and in imports from the previous year.