Japan: Exports shrink in May
Latest reading: Yen-denominated merchandise exports shrank annually for the first time since September in April, declining 1.7%. This contrasted April’s 2.0% increase, despite being a less sharp fall than expected by the market.
Meanwhile, yen-denominated merchandise imports shrank 7.7% in May, after declining 2.2% in April.
Overall, the yen-denominated merchandise trade deficit widened to a four-month high of JPY 0.6 trillion in May from JPY 0.1 trillion in the previous month.
Outlook: Over the past month, our panelists have cut their forecasts for Japan’s growth of exports of goods and services in 2025 by a further 0.4 percentage points. This largely reflects the expected hit to external demand from Trump’s tariffs.
Still, exports are still seen expanding more quickly than in 2024, boosted by higher demand for IT products, a Japanese forte. Japan and the U.S. remain locked in trade talks ahead of 9 July, when a 24% U.S. “reciprocal” tariff is set to kick in.
Panelist insight: On Trump’s tariffs, Nomura’s Yuki Ito and Kyohei Morita said:
“We would not necessarily say that downward pressure on exports from US tariffs has started to materialize […]. To avoid an erosion in price competitiveness for export products due to higher tariffs, Japanese automakers and others have been choosing to lower export prices (ie, squeeze their own margins), at least initially. This may be helping to prevent a larger decline in exports to the US. We expect the US economy to slow through Jul–Sep 2025 as a result of the tariffs imposed by the Trump administration. We see a risk that Japanese exports to the US could be pushed down in Jul–Sep along with this.”