Japan exports fall most in four years as tariff pain deepens
Exports to the US fell 10.1 per cent in July, with shipments of vehicles and auto parts plunging 28.4 per cent and semiconductor manufacturing equipment sliding 31.3 per cent.
TOKYO - Japan's exports sustained their steepest drop in more than four years as US tariffs continued to weigh on global commerce, clouding the outlook for economic growth at a time when personal spending remains unsteady.
Exports fell 2.6 per cent in value in July from a year earlier, sliding more than the median forecast of a 2.1 per cent decline, the Ministry of Finance reported on Aug 20. The downturn, led by cars, auto parts and steel, was the biggest since February 2021.
Export volumes rose by 1.2 per cent, suggesting exporters are continuing to absorb US tariff costs by cutting selling prices to preserve market share.
Imports decreased 7.5 per cent and the trade balance flipped to a deficit of 117.5 billion yen (S$1 billion).
The latest slide in exports may strengthen concerns over whether Japan's economy can continue to expand as US President Donald Trump's tariffs weigh on global trade. While the economy has so far managed to eke out growth in the last five quarters despite weakness in domestic consumption, further drops in exports could drag the economy into reverse.
Exports to the United States dropped by 10.1 per cent in July from a year earlier, with shipments of vehicles and auto parts plunging 28.4 per cent and 17.4 per cent, respectively. Shipments to the US of semiconductor manufacturing equipment slid 31.3 per cent.
In April the US imposed a 25 per cent tariff on imports of Japanese cars and auto parts and a 10 per cent duty on most other goods. A levy on imports of steel was doubled to 50 per cent in early June.
The levies on cars and broad-based goods will be assessed at 15 per cent under a trade deal reached in late July, although it may take some time for that deal to be implemented. Written documentation on the trade deals agreed to with Japan and South Korea are 'weeks away,' US Commerce Secretary Howard Lutnick said on Aug 19 in an interview with CNBC.
Beyond the US, exports to China fell 3.5 per cent, while shipments to Europe declined 3.4 per cent.
Continued falls in exports may also encourage the Bank of Japan (BOJ) to adopt a cautious stance. The ability of the economy to show resilience in the face of the US duties is a factor in the calculus for the BOJ as it considers the best timing for its next interest rate hike. The BOJ is widely expected to stand pat when it next sets policy on Sept 19.
The yen averaged 145.56 per the US dollar in July, 8.9 per cent stronger than a year earlier, according to the Finance Ministry. BLOOMBERG
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