Japanese exports rose 7.2% years-to-year in January (vs 2.8% in December, market consensus 7.7%).
The US is a prominent destination for Japan Inc., with foreign shipping to the largest Globe economy posted a strong 8.1% increase. However, this arises because of the front loading before the full scope of President Trump’s plan for tariffs. Exports to China dropped 6.2%, maybe because of the Chinese New Year holiday. Although exports are weak to China, shipping to Asia and ASEAN rose 6.3% and 15.6% respectively. Regional trade shows a healthy profit, and we believe that the route of Chinese trade may be one of the reasons for the new power in exports between regions.
Transportation equipment, the largest export category, grows 12%solid. The ship jumped 106.9%, while motor vehicle exports increased by 10.5%. Car makers in particular seem to rush to send products in front of the US levy to the car. We suspect that medical products surged 23.4% strong for the same reason.
Meanwhile, imports rose 16.7% greater than expected (vs 1.7% in December, 9.3% market consensus). This surge caused a trade deficit of -2,758 trillion JPY. Imports of capital goods increase strongly. Overall orders of engine and electric engines, for example, each increased 46.9% and 18.2%. This is a good sign for increasing capital investment in the current quarter.
Core engine orders fall for the first time in three months
Separately, an unexpected core engine order fell 1.2% of the month to month, adjusted seasonally (vs 3.4% in November, the market consensus was 0.5%), after an increase in solid in the previous two months. But when smoothing monthly volatility, the growth of the engine core is accelerated to 2.9% quarter-to-quarter, adjusted seasonally, in December from -1.3% in September. Increased imports of capital goods in January and core machinery orders can offer a ray of hope after the report on the gross domestic product on Monday, which experienced a decline in imports. But in the midst of a major uncertainty about the upcoming Trumpian storms, the 2025 prospects of Japan remain cloudy.
Source: Ing
