Japan: Exports fall further in June; Japan and U.S. agree trade deal
Latest reading: For the first time in two years, in June, yen-denominated merchandise exports shrank annually for the second consecutive month, declining 1.3% (May: -1.7% yoy). Economists had expected a small increase. The value of shipments to the U.S. continued to shrink, likely affected by Trump’s tariffs. Auto exporters saw their receipts fall, albeit likely in large part because of cutting prices: The volume of passenger cars shipped increased.
Meanwhile, yen-denominated merchandise imports surged 9.5% in June, after declining 0.5% in May.
Overall, the yen-denominated merchandise trade balance flipped to a JPY 0.2 trillion surplus in June from a JPY 0.6 trillion deficit in the previous month.
Outlook: Since Trump unveiled his “reciprocal” tariffs in April, our panelists have significantly cut their forecasts for Japan’s growth of exports of goods and services in 2025. That said, since Japan and the U.S. signed a trade deal on 23 July, our panelists have raised their 2025 export forecasts by roughly 0.3 percentage points. Under the deal, the U.S. will levy tariffs of 15% on Japanese goods, higher than before the start of Trump’s term but still providing a lifeline to Japan’s auto industry, which had been facing levies of 27.5%.
Overall, exports are still seen expanding more quickly in 2025 than in 2024, boosted by higher demand for IT products, a Japanese forte.
Panelist insight: On the recent Japan-U.S. trade deal, Nomura analysts said:
“The agreement reached between the US and Japan suggests that the average effective tariff rate on Japanese exports to the US in 2025 H2 will be 16.5%. This is close to the 18.3% figure in our previous baseline scenario. This agreement between the US and Japan is unlikely to trigger changes to our forecasts for the economy and prices.”
Goldman Sachs economists commented:
“We revise up our export forecasts by a little less than 2 pp for FY2025 and FY2026, assuming that Japanese auto export volumes to the US are maintained. We also revise up our capex forecast, given the reduced uncertainty and companies’ solid capex appetite […]. However, we think it is likely that tariff increases will not end here. Our US economics team expects the introduction of several sector-specific tariffs, including on semiconductors and pharmaceuticals.”