Japan’s exports rose by 3.1% in October compared to the same month a year ago, marking a recovery from a 1.7% decline in September, which had been the lowest in 43 months. This rebound outpaced economists’ expectations of a 2.2% rise, according to a Reuters poll.
Government data highlighted that exports to the Middle East surged by 35.4%, making it the region with the highest growth. This significant uptick contributed to Japan’s overall export recovery.
Imports Increase Slightly, Trade Deficit Widens
Imports to Japan increased by 0.4% in October, contrary to the anticipated 0.3% decline predicted by Reuters. As a result, Japan’s trade deficit widened to 461.2 billion yen ($2.98 billion), surpassing both the expected 360.4 billion yen and the revised 294.1 billion yen deficit in September.
Impact of U.S. Trade Policies on Japan
Global trade dynamics, especially the trade policies of U.S. President-elect Donald Trump, are emerging as critical factors for Japan’s export-driven economy. Daniel Hurley, a global equities portfolio specialist at T. Rowe Price, emphasized the potential risks posed by Trump’s tariff policies and trade relations.
“Tariffs are clearly the biggest risk for an open and exporting economy like Japan’s,” Hurley noted, adding that Japan’s close relationship with the U.S. and Trump could either mitigate or exacerbate these risks.
Risks from Global Trade Tensions
Hurley also pointed to the broader implications of U.S.-China trade tensions, which could significantly impact Japan. “Any escalation of tensions between the U.S. and China on tariffs and trade is likely to weigh upon global trade and global growth,” he explained. As an open and cyclical economy, Japan stands to be affected by any downturn in global trade or economic activity.
Outlook for Japan’s Economy
While the export rebound in October is a positive sign, the risks posed by global trade uncertainties and potential tariff escalations remain a concern for Japan’s economy. The widening trade deficit and reliance on key trading partners like the U.S. will be closely watched in the months ahead.