Japan’s Record Exports Amid Trade Deficit and Tariff Threats

• Japan’s exports hit a record high of 107.9 trillion yen in 2024, despite a trade deficit of 5.3 trillion yen.
• The surge in exports may be due to Japanese companies anticipating potential tariffs from the U.S. Despite the record exports, Japan has recorded a trade deficit for four straight years.
• The global community is closely watching these developments and their potential impact on international trade and relations.

Japan, the world’s third-largest economy, achieved a significant economic milestone in 2024, despite the ongoing trade deficit. The Finance Ministry reported a 44% decline in the annual trade deficit from the previous year, with the deficit amounting to 5.3 trillion yen. This figure was derived by subtracting the value of imports from exports, according to government data.

The surge in imports was primarily attributed to rising energy costs and escalating inflation worldwide. However, Japan’s exports reached an unprecedented 107.9 trillion yen, crossing the 100 trillion yen mark for the second consecutive year. This figure is the highest on record for comparable data dating back to 1979.

Interestingly, some Japanese companies may have expedited their exports in anticipation of potential tariffs by U.S. President Donald Trump. Trump has expressed his intention to impose a 25% tariff on Canada and Mexico starting February 1. During his campaign, he also threatened to impose tariffs on imports from China, although the specifics of this plan remain unclear.

Trade Dynamics and Market Reactions

In December, exports saw a greater-than-expected increase of 2.8% year-on-year, while imports rose by 1.8%. Exports to Asian and European nations grew, while those to the U.S. saw a slight decrease. Imports, on the other hand, grew most from India, Hong Kong, and Iran.

Japan’s vehicles, semiconductors, and other machinery were in high demand. However, the weakening yen, a recent trend, has inflated the value of imports. The U.S. dollar has been hovering at 150-yen levels, sometimes surpassing 160 yen, over the past year, while a year ago it was often at 140-yen levels.

Despite these developments, Japan has recorded a trade deficit for four straight years. However, last year’s deficit was considerably smaller than the 9.5 trillion yen deficit for 2023.

Global Impact and Future Implications

In related news, shares of Japanese automakers and South Korean battery makers fell after President Trump announced potential tariffs on Canada and Mexico. However, Chinese manufacturers saw their stocks rise after Trump did not target China in his inauguration speech or immediately impose tariffs on Beijing as previously promised.

Honda Motor, Japan’s second-largest automaker, saw its shares fall by 0.3% at 1,478 yen. Honda sends 80% of its Mexican output to the U.S. market, and its chief operating officer Shinji Aoyama warned in November that the company would have to consider shifting production if the U.S. were to impose permanent tariffs on imported vehicles.

In the face of these developments, world leaders have congratulated President Trump on his inauguration, urging stronger alliances or continued cooperation between their countries and the U.S. Trump’s return to the White House signals a significant shift in international relations, with the new president immediately ordering the U.S.’ withdrawal from the Paris Climate Agreement and World Health Organization.