Japan's Trade Deficit Hits Near One-Year High in January, Trump's Tariff Policy May Worsen the Situation!

TradingKey - Japan's import and export figures continued to grow in January, but the trade deficit is also widening, potentially exacerbated by Trump's tariff policy. 

On Wednesday, February 19th, Japan's Ministry of Finance released mixed trade data for January. According to the figures, exports rose 7.2% year-on-year to over 7.8 trillion yen, marking four consecutive months of growth, though the annual growth rate fell short of the market expectation of 7.9%.

Imports surged by 16.7% year-on-year to over 10.6 trillion yen, significantly exceeding the market estimate of 9.7%. This resulted in a trade deficit of 2.8 trillion yen in January, the highest in nearly a year, pushing Japan—once a trade surplus powerhouse—further into deficit territory.

The sharp increase in imports was primarily driven by rising energy prices and a weak yen. Export growth was mainly tied to the United States, with strong performance in sectors such as metal processing machinery and automobiles, which saw an annual growth of 8.1%.

However, U.S. President Trump indicated on February 18th that he might impose a 25% tariff on imports, including automobiles, chips, and pharmaceuticals, potentially taking effect as early as April. This move could lead to a significant drop in Japanese exports, with finance ministry officials stating they would "monitor the developments."

According to the data, the United States is Japan's largest export market, accounting for one-fifth of its total shipments, valued at approximately $700 billion.