Japan exports slip for fourth straight month, but less than expected

Japan’s exports contracted less than expected in August as shipments to its largest trading region — Asia — rebounded, though the overall growth stayed negative for a fourth straight month.

Japanese shipments fell 0.1% year on year, compared to a 2.6% fall in July. This was much softer than the 1.9% contraction expected by economists polled by Reuters.

The country’s imports declined at a softer pace of 5.2%, compared to the 7.4% contraction in July, but more than the 4.2% fall expected in the Reuters poll.

Exports from the world’s fourth-largest economy have fallen into negative territory as the country grapples U.S. tariffs and a slowdown from the front-loading of exports at the start of the year.

Japan is also looking at political uncertainty as Prime Minister Shigeru Ishiba is set to step down, following electoral debacles that saw the ruling Liberal Democratic Party lose its majority in both the lower and upper houses of parliament.

Exports to Asia climbed 1.7% compared to the same period last year, while shipments to Western Europe saw a sharp 7.7% jump, partially offsetting a steeper fall in exports to the U.S.

Outbound goods to the U.S. dropped 13.8% year on year, more than the 10.1% contraction seen in the prior month following a trade deal with Washington in late July, which saw tariff rates lowered to 15% from 25%.

Shipments of autos to the U.S. also continued to plunge, falling 28.3% in terms of value year on year, just marginally softer than the 28.4% decline in July. Autos were Japan’s largest exports to the U.S. in 2024.

Exports to mainland China fell 0.5% year on year, but shipments to Hong Kong jumped 14.4%. China is Japan’s largest trading partner on a single-country basis.

Japan’s benchmark Nikkei 225 index was down 0.12% on Wednesday after the data release.

The data comes ahead of the Bank of Japan’s rate decision on Friday, with economists expecting the central bank to continue to hold rates at 0.5%.

Marcel Thieliant, head of Asia-Pacific at Capital Economics, said that while overall exports were still “holding up” in the face of U.S. tariffs, export volumes could shrink in 2026 as slower external demand kicks in.

While the 0.1% headline fall in exports was softer than analysts’ expectations, Thieliant said that the figures were “less impressive than they look,” pointing to a recent weakening in new export orders in Japan’s August manufacturing purchasing managers index.

Due to tariff frontrunning, full-year exports from Japan are forecast to rise 2.5% compared to last year, he said, adding that outbound shipments would fall 0.7% in 2026 due to lower capital spending in Japan’s key export markets.