Japan Exports Rise in January on Brisk Auto Exports to US, But Tariff Threat Looms

Reuters

12:01 JST, February 19, 2025

TOKYO, Feb 19 (Reuters) – Japan’s exports rose for a fourth consecutive month in January led by auto shipments to the U.S., data showed on Wednesday, though economists said President Donald Trump’s threat of hefty tariffs on car imports could hurt future shipments.

The solid trade report came after Japan’s GDP data released on Monday showed the economy grew faster than expected in the October-December quarter, strengthening the case for the central bank to continue raising interest rates.

Total exports in January rose 7.2% year-on-year, according to the data, less than a median market forecast for a 7.9% increase and following a 2.8% rise in December.

Exports to the U.S. rose 8.1% thanks to upbeat auto sales, as well as a weaker yen that boosted the value of exports. Those to China dropped 6.2% from a year earlier, dragged down by a decline in shipments of chipmaking equipment.

Imports grew 16.7% in January from a year earlier, compared with market forecasts for a 9.7% increase.

As a result, Japan ran a trade deficit of 2.759 trillion yen ($18.16 billion) compared with the forecast of a deficit of 2.1 trillion yen.

Future trade figures could be affected by Trump’s flagged tariffs of around 25% on U.S. auto imports, said Daiwa Institute of Research economist Koki Akimoto.

“As autos represent Japan’s biggest exports, the impact on auto tariffs would be significant compared to that of other products,” he said. “Higher caution is required now.”

Trump’s tariff policies could potentially damage Japan’s export-reliant economy, as the U.S. is Japan’s largest export destination, accounting for a fifth of its total shipments valued at $700 billion.

Automobiles are the biggest U.S. export product, accounting for 28% of U.S.-bound exports.

The large tariffs are likely to force major automakers such as Toyota Motor 7203.T and Honda Motor 7267.T to adjust their global production, analysts say.

The U.S. passenger car tariff rate stands at 2.5% currently, while a 25% tariff is levied on highly profitable imported pickup trucks.

Planned reciprocal tariffs on a wider range of products could also affect Japan. While Japan’s average applied tariff rate is among the lowest in the world, non-tariff barriers, such as safety regulations, could come under increased scrutiny.

Trump pressed Japanese Prime Minister Shigeru Ishiba at their first White House summit this month to close Japan’s $68.5 billion annual trade surplus.

Japan had the largest foreign direct investment position in the United States in 2023 with $783.3 billion, followed by Canada, and Germany, according to data from the U.S. commerce department.

Exports continue to be a key driver of Japan’s economic recovery, while some analysts caution that persistent inflation in food and other everyday products could dampen momentum in private consumption.