Japan’s exports fell for a fourth straight month in August as higher U.S. tariffs weighed heavily on automakers and manufacturers. Exports to the U.S. plunged 13.8% year-on-year, the sharpest drop since early 2021, with automobiles down 28.4% and chipmaking equipment tumbling nearly 39%. Mizuho Research’s Saisuke Sakai noted that while some automakers have absorbed tariff costs by lowering export prices, others are now raising U.S. prices to pass costs onto consumers. He warned that combined with U.S. economic uncertainty, the tariff drag on Japan’s output will intensify into year-end.
Overall exports slipped 0.1% y/y, a milder decline than expected, while imports fell 5.2% on cheaper oil. The narrower trade gap with the U.S. — at its smallest since early 2023 — could not prevent Japan from running a broader ¥242.5 billion ($1.66 billion) deficit. Washington’s July agreement to cut the baseline tariff rate on Japanese goods to 15% from higher threatened levels has provided some relief, but the levy remains multiple times the pre-trade-war norm of 2.5% on autos. Economists now see Japan’s economy contracting this quarter, and BOJ Governor Kazuo Ueda has pledged caution on rate hikes given the external risks.
Data from earlier:
Persistent export weakness underscores downside risks for Japan’s economy, reinforcing expectations the BOJ will stay cautious on tightening. U.S. tariffs are already curbing auto and chip equipment shipments, pressuring JPY through weaker trade flows. Continued weakness could weigh on equities tied to autos and exporters, while keeping policy support in play.
