^{Photo: Bloomberg.com}

Japan’s export engine showed signs of revival in September, ending a four-month streak of declines with a 4.2% year-on-year increase, according to data from Japan’s Ministry of Finance. The rebound was fueled primarily by stronger demand across Asia, even as shipments to the United States — Japan’s second-largest trading partner — continued to tumble.

Although the growth undershot economists’ expectations of a 4.6% rise from a Reuters poll, it signals that Japan’s trade sector is gradually regaining momentum following months of weakness tied to global economic uncertainty and trade friction.

Strong Demand from Asia Boosts Overall Exports

Exports to Asian markets surged 9.2% year on year, accounting for nearly half of Japan’s total outbound shipments. Trade with mainland China, Japan’s largest export destination, rose 5.8%, marking a solid recovery from earlier declines caused by a slowdown in Chinese manufacturing.

Key categories driving Asia-bound exports included semiconductors, machinery, and precision instruments — reflecting a rebound in regional tech demand. Semiconductor exports alone jumped 12.6%, buoyed by robust chip production and supply chain recovery across Asia following 2023’s global semiconductor shortage.

This resurgence helped offset a steep drop in U.S.-bound shipments, which fell 13.3%, marking one of the sharpest contractions in recent years.

U.S. Shipments Decline Despite Tariff Relief

The weakness in exports to the U.S. was most visible in the auto sector, where Japanese car exports slid 24.2% in value terms, following an even steeper 28.4% decline in August.

This slump came even after Tokyo and Washington finalized a revised trade agreement in July, reducing tariffs on Japanese goods from 25% to 15%. The lower tariffs took effect on August 7, but analysts say the benefits have yet to fully materialize.

“The latest numbers look encouraging, but the rebound isn’t as strong as it seems,” said Hirofumi Suzuki, Chief FX Strategist at Sumitomo Mitsui Banking Corporation. “Part of the growth is due to a low base from last year, and policy factors like tariffs still have a larger influence on exports than currency levels.”

Imports Rebound as Domestic Demand Recovers

Japan’s imports rose 3.3% year on year, reversing a 5.2% decline in August and exceeding market expectations of 0.6% growth. The increase reflects rising energy prices and stronger demand for industrial inputs, signaling renewed momentum in domestic manufacturing and consumption.

The world’s fourth-largest economy has been balancing between sluggish global trade and a recovering local market. Recent fiscal stimulus efforts and a softer yen — which fell to nearly ¥150 against the U.S. dollar in September, compared to ¥147 a year earlier — have boosted export competitiveness, though the impact remains uneven across industries.

Political and Economic Shifts Under Japan’s New Leadership

The release of the latest trade data coincided with the historic appointment of Sanae Takaichi as Japan’s first female prime minister. Takaichi’s administration has pledged to maintain a loose monetary stance and introduce new fiscal measures aimed at stimulating growth.

Her policies are expected to favor exporters, particularly companies listed on the Nikkei 225, which recently hit a record high amid optimism over Japan’s industrial recovery. Analysts predict that if the yen remains weak, Japan’s manufacturing exports could strengthen in the months ahead — provided U.S. demand stabilizes.

Global Trade Uncertainties Cloud the Outlook

While Asia’s resurgence offers a much-needed lift, concerns linger over global trade tensions, particularly between the U.S. and China. These tensions continue to affect supply chains and may indirectly weigh on Japan’s export performance.

“Japan’s export recovery is fragile,” Suzuki warned. “Until we see clearer signals of demand recovery in the U.S. and Europe, it’s difficult to say the trade sector has turned the corner.”

For now, Japan’s export story remains a tale of two markets: booming Asian demand on one hand, and a cooling U.S. economy on the other. How Tokyo navigates this delicate balance — amid geopolitical shifts and evolving trade alliances — will determine whether this rebound turns into sustained growth or just another temporary upswing.