Japan reported an increase in January exports, continuing a trend of expanding overseas shipments that has supported economic activity, but the trade surplus narrowed due to rising imports of energy and intermediate goods.

Export growth was driven by shipments to major partners in Asia and North America, particularly machinery and electronic components.

However, burdened by higher import costs for fuels and raw materials, the overall trade balance showed a smaller surplus than expected.

Policymakers said the figures highlight the complexity of external sector dynamics in Japan’s economy and the importance of managing import cost pressures while sustaining export momentum.

Analysts said that growth in exports reflects resilience in Japan’s industrial base, even as global demand signals remain uneven.

Asia’s demand for Japanese capital goods has helped underpin shipments, though slowing demand in some segments could influence future performance.

Import costs have been elevated due to energy price swings and supply chain adjustments, weighing on the trade outcome.

Japan’s currency — the yen — has been sensitive to trade developments, with fluctuations affecting price competitiveness for exporters.

A slightly weaker yen provided some support for overseas shipments, but import costs continue to temper trade gains. Market participants said currency and trade dynamics will remain key for external sector performance this year.

Corporate leaders highlighted that producing high-value capital goods and technology remains central to Japan’s export strategy, but emphasised the need to diversify markets and mitigate cost risks.

Policy measures that support export finance and supply chain resilience have been discussed in recent forums. Investors said that trade outcomes will be integral to broader growth forecasts for Asia’s third-largest economy.

Looking ahead, further data on industrial output and business sentiment will help gauge whether export strength can be sustained even as external pressures persist.

Japan’s ability to balance external demand with import cost management remains a core theme for economic analysts.

Source: Reuters