Honda Motor Vehicles are shipped at the port of Yokohama on Thursday, February 6, 2025. Nominal wages rose in Japan at the fastest pace in nearly 30 years in December, confirming the Bank of Japan’s latest rate hike decision and putting it on track for further tightening measures. Photographer: Toru Hanai/Bloomberg via Getty Images
Bloomberg | Bloomberg | Getty Images
Japan’s exports in May increased by 17% year-on-year, the fastest pace since November 2022, driven by strong demand for automobiles and semiconductors.
The growth rate beat the 16.2% forecast by economists polled by Reuters and was up from 14.8% in April.
While export value increased, volumes remained largely unchanged, registering an increase of only 0.5%. This indicates that much of the increase in amounts is likely due to price and foreign exchange-related effects as the yen continues to weaken.
The surge in exports was driven by a 17.9% year-over-year increase in exports to China and a 12.5% increase in exports to the United States. Beijing is Tokyo’s largest trading partner, and Washington its second largest trading partner.
Exports to the Middle East were hit by the US-Iran war, falling 32%.
According to official data, the country’s semiconductor exports in May increased by 61.2% in value compared to the same month last year, driven by strong demand for artificial intelligence technology, and car shipments increased by 16.4%.
Exports remain one of Japan’s main economic drivers, with the economy growing 0.5% sequentially in the first quarter and 1.8% on an annualized basis. But this growth engine could soon slow down, according to Norihiro Yamaguchi, chief Japan economist at Oxford Economics.
Yamaguchi expects the rise to slow gradually, noting that while strong tech-related demand amid the AI boom will provide short-term support, slower global growth will limit broader demand for Japanese goods, especially non-AI capital goods.
Japan’s imports in May rose 12.5% year-on-year, the highest growth since January 2025, but fell short of the 12.8% expected in a Reuters poll. Oil imports decreased by 28.5% compared to the previous year due to the conflict in the Middle East.
The economic data came after the Bank of Japan raised its policy interest rate by 25 basis points on Tuesday to 1%, the highest level in 30 years, as domestic inflation rose and the yen continued to weaken.
A weaker yen is likely to boost exports, but it will also cause domestic instability due to higher import inflation and lower purchasing power.
Japanese benchmark Nikkei Stock Average The index fell by 0.5%, but circle The stock was little changed after the data was released, trading at 160.4 against the US dollar.
The Reuters Tankan Survey (which measures business confidence in Japan’s major manufacturing industries and is closely monitored by the central bank) rose to +13 in June, the highest level in three months from +8 in May. The non-manufacturing index rose to +32. A positive number indicates that optimists outnumber pessimists.
