Japanese exports rebounded in September, increasing 4.2% year-on-year, slightly below market expectations of 4.4% but marking a recovery from the -0.1% recorded in August. While exports to the United States fell 13.3% YoY due to tariffs, shipments to Asia (9.2%), China (5.8%), and the EU (5.0%) posted solid gains, highlighting resilience in Japan's trade outside the US.
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"The US tariffs negatively affected exports to the US, but shipments elsewhere stayed strong, highlighting Japan's export resilience," the report noted. Export declines to the US were broad-based across sectors, including chemicals (-17.8%), iron and steel (-34.7%), machinery (-8.7%), electrical machinery (-3.7%), and transport equipment (-19.2%). In contrast, exports of machinery, electrical machinery, and transport equipment to Asia, China, and the EU remained robust, though iron and steel faced global headwinds due to extended tariffs, sluggish construction activity, and competitive pricing. Vehicle exports also showed weakness (0.6%), driven by the US market, while semiconductor exports continued to support chipmakers.
Imports rose 3.3% YoY, recovering from a -5.2% decline in August and exceeding the 0.6% market consensus. Mineral fuel prices fell 14.4%, indicating potential reductions in domestic energy costs, while machinery and electrical machinery imports rose 13.8% and 9.9% respectively, signalling a boost to capital investment in the near term. The trade balance registered a deficit of JPY 234.6 billion as imports outpaced exports.
ING economists view the trade data as supportive of Japan's economic recovery. "Today's trade data was overall positive for growth. The weakness of US exports was more than offset by strong demand from the rest of the world," the report said. They anticipate gradual normalisation of exports to the US and continued recovery in the Japanese economy, which could influence the Bank of Japan's (BoJ) monetary policy decisions. Markets widely expect a pause in the BoJ's October meeting, with potential resumption of rate hikes in December, though an October hike remains possible depending on growth, inflation, and policy signals.
The ING report emphasises monitoring domestic economic indicators, USD/JPY movements, and statements from Japan's new Prime Minister Takaichi to assess the timing of potential BoJ rate adjustments.
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