On the import side, Japan recorded a 5.1% annual increase in December, a sharp acceleration from November’s 1.3% rise and higher than the 3.6% gain forecast by analysts. The uptick was driven by purchases of energy products and raw materials, whose prices have stayed elevated amid supply constraints. The higher import bill trimmed the monthly trade surplus but added evidence of firm domestic demand heading into 2026.
For the full calendar year, exports advanced 3.1%, down from a 6.2% increase in 2024. Outbound shipments to China slipped 0.4%, while those to the United States dropped 4.1%. By contrast, exports to Hong Kong jumped 17.8%, and sales to Taiwan rose 15.1%, partially offsetting weakness in the two largest destinations. Import growth for 2025 stood at 4.2%, producing a modest narrowing of Japan’s trade deficit compared with 2024.
Economists attribute the year’s export performance to several factors: front-loading of orders ahead of tariff changes, continued strength in demand for artificial-intelligence-related electronics, and exchange-rate advantages from a soft yen. However, they warn that rising U.S. import levies, stiff competition from regional manufacturers and slowing global manufacturing activity could restrain Japan’s shipments in the coming quarters. Moody’s Analytics, in a recent note, cautioned that industrial production indicators are already signaling softness in sectors exposed to overseas competition.
Geopolitical tensions have added to the uncertainty. Relations between Tokyo and Beijing cooled after comments by Prime Minister Sanae Takaichi in November suggested that Japan might intervene militarily if China attempted to seize Taiwan by force. In response, China suspended seafood imports from Japan and, earlier this year, introduced restrictions on exports of dual-use items to Japanese buyers. Trade specialists at the World Trade Organization have cited the dispute as a potential risk to supply chains across East Asia.
December’s trade data arrive just weeks before Japan’s snap election scheduled for Feb. 8. The country’s Lower House is set to be dissolved on Friday, paving the way for a campaign that will focus heavily on economic policy. A victory for Takaichi would give her coalition a clear mandate to advance stimulus measures and infrastructure spending through the Diet. Market participants widely expect that such an outcome would favor a continuation of the weak-yen environment sought by exporters, reinforcing the so-called “Takaichi trade” that has lifted equities since the election announcement.
Japanese shares have generally moved higher, and the currency has remained under pressure against the dollar since early January. Traders argue that expectations of fiscal expansion, along with the Bank of Japan’s cautious approach to tightening monetary policy, support the current trend. Nevertheless, analysts emphasize that persistent trade frictions with the U.S. and China, along with slowing global demand, could temper the benefits of a competitive exchange rate if external orders lose momentum.
With global manufacturing indicators still signaling subdued growth, Japan’s export-reliant sectors face a delicate balancing act in 2026. Automakers, electronics firms and machinery producers are monitoring tariff developments in Washington and Beijing, while simultaneously diversifying shipments to faster-growing Asian economies. Industry groups have urged the government to intensify negotiations aimed at preserving access to key markets and to accelerate digitalization initiatives designed to raise productivity at home.
Crédito da imagem: Bloomberg
