Japan's exports post first drop in 8 months as tariffs hit auto firms
Prime Minister Shigeru Ishiba said after the Group of Seven summit in Canada on Tuesday his country had not reached a comprehensive tariff agreement with Washington as some disagreements persisted between the two nations.
Japan and the US 'explored the possibility of a deal until the last minute,' he added.
Tokyo is scrambling to find ways to get Washington to exempt Japan's automakers from 25 per cent automobile industry-specific tariffs, which are hurting the country's manufacturing sector.
Japan also faces a 24 per cent 'reciprocal' tariff rate starting on July 9 unless it can negotiate a deal with Washington.
Japan's automobile sector accounted for about 28 per cent of the total 21 trillion yen ($145 billion) worth of goods the Asian country exported to the US last year.
Its total exports in May dropped 1.7 per cent year-on-year by value to 8.1 trillion yen, government data showed, smaller than a median market forecast for a 3.8 per cent decrease, and following a 2 per cent rise in April.
Exports to the US slumped 11.1 per cent last month from a year earlier, the largest monthly percentage decline since February 2021, dragged down by a 24.7 per cent plunge in automobiles and a 19 per cent fall in auto components, while a stronger yen also helped reduce the value of shipments. Exports to China were down 8.8 per cent.
In terms of volume, however, US-bound automobile exports dipped just 3.9 per cent, indicating that the biggest Japanese exporters were absorbing the tariff costs.
'The value of automobile exports to the US fell, but their volume did not drop that much,' Daiwa Institute of Research economist Koki Akimoto said. 'This indicates Japanese automakers are effectively shouldering the tariff costs and not charging customers.'
So far major Japanese automakers have refrained from price increases in the US to mitigate the tariff costs, except for Subaru and Mitsubishi Motors.
'They are buying time right now to see the course of Japan-US trade negotiations,' Akimoto said.
The absence of price hikes could affect their profits, but their fiscal base is generally solid, he added.
While Japanese stocks and the yen showed little reaction to the data, shares of car companies have come under pressure this year due to concern about the tariff impact.
Automakers and other transport companies are the second-worst performer this year among the Tokyo market's 33 sector sub-indices, down almost 12 per cent. Only makers of precision equipment have fared worse.
Toyota 7203.T, the world's top-selling automaker, has estimated that tariffs likely sliced 180 billion yen from its profit in April and May alone. Honda 7267.T has said it expects a 650 billion yen hit to its earnings this year from tariffs in the US and elsewhere.
Reuters
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