Japan’s Trade Surplus Increases in December

Japan’s trade surplus grew more than expected in December, primarily due to resilient exports to the U.S. and China, even as weaker imports suggested some local demand softness.

The trade balance surged to a surplus of 130.9 billion yen (approximately $840 million), defying expectations of a 55 billion yen deficit. This marked a significant turnaround from a 110.3 billion yen deficit in November, according to Thursday’s government data.

The improvement was largely driven by stronger-than-expected exports, which rose by 2.8% year-on-year in December, outperforming predictions of a 2.3% increase. However, this represented a slowdown compared to last month’s 3.8% growth.

Conversely, Japan’s trade balance also benefited from softer-than-expected imports, indicating subdued local demand. Imports increased by 1.8% in December, below the anticipated 2.6%, but a recovery from the 3.8% contraction seen previously.

Despite the improvement, strong exports highlight relatively robust demand from major markets like the U.S. and China. Nevertheless, potential trade tariffs from U.S. President Trump could alter this positive trend.

Exporters seemed to have front-loaded shipments prior to Trump’s presidency due to his intent to impose considerable tariffs from his first day in office.

While Trump did not enact immediate tariffs upon taking office this week, he indicated the possibility of increased tariffs on China, Mexico, and Canada, along with a potential universal import tariff. Such actions could negatively impact countries with substantial trade ties to the U.S., the world’s largest economy.