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Japan's Exports Show Mixed Performance Amid Shifting Trade Patterns and Geopolitical Context

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Japan's Exports Show Varied Trends Amidst Shifting Global Landscape

Japan's export performance in late 2025 and early 2026 revealed a complex picture, with overall growth figures often falling short of analyst expectations, even as certain regions showed robust demand. Shipments to the United States experienced declines, while exports to parts of Asia and Western Europe saw notable increases. This period was marked by evolving trade relations, significant geopolitical developments, and upcoming domestic political and economic events.

Overall growth figures sometimes differed from analyst projections, with declines in U.S. shipments offset by increases to certain Asian regions and Western Europe.

Overall Export Figures

December 2025:

  • Exports increased by 5.1% year-on-year, missing analysts' estimates of 6.1% growth.
  • Imports rose by 5.1% year-on-year, surpassing Reuters' estimates of 3.6% and marking an increase from November's 1.3%.

Full Year 2025:

  • Exports grew by 3.1%, a slower rate compared to the 6.2% increase observed in 2024.

February (latest available data):

  • Exports increased by 4.2% year-on-year, a slowdown from the 16.8% rise recorded in January. However, this figure exceeded the 1.6% increase anticipated by economists.
  • Imports climbed by 10.2%, which was below the expected 11.5% increase and followed a 2.6% decline in January.

Regional Export Performance

United States

Shipments to the U.S. demonstrated a challenging trend during this period.

  • December 2025: Shipments declined by 11.1%. This followed an 8.8% rise in November, which was the first increase for U.S. exports since March 2025.
  • Japanese exports had previously fallen in mid-2025 due to U.S. tariff concerns but rebounded after a trade agreement reduced duties to 15%.
  • Full Year 2025: Exports decreased by 4.1%.
  • February: Exports fell by 8%, with the total value of auto exports to the U.S. declining by 14.8%.

    The announcement of Section 301 investigations has been noted as a potential factor for further weakening of exports to the U.S.

Mainland China and Asia

Performance across Asia showed a mixed but generally more positive picture compared to the U.S.

  • December 2025: Exports to mainland China, Japan's largest trading partner, rose by 5.6%. Shipments to Hong Kong surged by 31.1%, and exports to the broader Asia region saw a 10.2% gain.
  • Full Year 2025: Exports to mainland China decreased by 0.4%. Conversely, exports to Hong Kong climbed by 17.8%, and shipments to Taiwan increased by 15.1%.
  • February: Shipments to mainland China decreased by 10.9%. However, exports to Hong Kong increased by 32.3%.

    Exports to the bloc of 11 Southeast Asian nations rose by 5.1%, with their total value surpassing that of mainland China, making it Japan's second-largest export destination in February.

Europe

Europe emerged as a strong growth market in early 2026.

  • February: Exports to Western Europe increased by 17.5%, supported by a 10.9% rise in sales to Germany and an 18.9% increase to the U.K.

Contributing Factors and Economic Context

Stefan Angrick, head of Japan at Moody's Analytics, attributed the overall export rise in 2025 partly to the front-loading of U.S. shipments ahead of tariff increases, an increase in electronics and machinery due to an artificial intelligence boom, and a weak yen.

Angrick also identified several risks to the export outlook, citing higher U.S. import levies, international competition, and trade threats from China as factors impacting industrial production and export volumes.

The growth in Japan's February exports was driven by a 25.1% increase in the value of semiconductor exports and a 2.5% rise in motor vehicle exports year-on-year.

Geopolitical and Domestic Political Developments

Geopolitical tensions and domestic political maneuvering have played a significant role in the economic climate.

Relations between Tokyo and Beijing have been strained since November 2025, following comments by Prime Minister Sanae Takaichi regarding potential Japanese military intervention if China attempted to take Taiwan by force.

  • China subsequently suspended seafood imports from Japan.
  • In early 2026, China announced restrictions on the export of dual-use goods to Japan.

Japan is preparing for snap elections called by Prime Minister Sanae Takaichi for February 8, with the Lower House set for dissolution.

  • Analysts have suggested that a victory for Takaichi could allow her to advance her fiscal agenda and maintain a weak yen, which supports Japan's export-oriented economy.
  • Japanese markets have responded to the election announcement with a period known as the "Takaichi trade," characterized by generally rising stocks and a consistently weak yen.

Upcoming events include a Bank of Japan monetary policy meeting and a meeting between Prime Minister Sanae Takaichi and U.S. President Donald Trump, both scheduled for Thursday.