Japan’s exports soar in January, driven by US auto sales

According to data released on Wednesday, auto shipments to the United States drove Japan’s export growth for the fourth consecutive month in January. However, analysts warned that President Donald Trump’s threat of imposing high tariffs on auto imports could harm future sales.

Following the release of Japan’s GDP data on Monday, which demonstrated that the economy expanded more quickly than anticipated during the October-December quarter, the strong trade report reinforced the central bank’s argument to keep hiking interest rates.

According to the report, total exports increased 7.2% year over year in January, which was less than the median market projection of a 7.9% growth and after a 2.8% gain in December.

A weaker yen that increased the value of exports and positive vehicle sales drove an 8.1% increase in exports to the U.S. A decrease in shipments of chipmaking equipment caused those to China to fall 6.2% from the previous year.

In January, imports increased 16.7% over the same month the previous year, although the market had predicted a 9.7% growth.

In contrast to the projected trade deficit of 2.1 trillion yen, Japan ended up with a trade deficit of 2.759 trillion yen ($18.16 billion).

Trump’s proposed 25% tariffs on U.S. auto imports could have an impact on future trade data, according to economist Koki Akimoto of the Daiwa Institute of Research.

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

AUTO TARIFFS

The United States is Japan’s top export market, receiving a fifth of its $700 billion in shipments annually, so Trump’s tariff plans might harm the country’s export-dependent economy.

With 28% of all exports going to the United States, automobiles are the largest export product from the country.

According to economists, the high tariffs will probably compel big automakers like Toyota and Honda to modify their global operations.

Currently, the United States imposes a 2.5% tax on passenger cars and a 25% duty on very lucrative import pickup trucks.

Japan may also be impacted by planned reciprocal tariffs on a larger range of goods. Even though Japan has one of the lowest average applicable tariff rates in the world, non-tariff obstacles like safety rules may be scrutinized more closely.

During their first White House meeting this month, Trump pushed Japanese Prime Minister Shigeru Ishiba to reduce Japan’s yearly trade surplus of $68.5 billion.

According to data from the U.S. Commerce Department, Japan had the highest foreign direct investment position in the United States in 2023, with $783.3 billion, followed by Canada and Germany.

Although some economists warn that sustained inflation in food and other everyday goods could slow the pace of private consumption, exports remain a major factor in Japan’s economic recovery.

Read More: Australia Cuts Interest Rates After 4 Years Amid Economic Concerns