Japan Trade Gap Narrows Sharply

Japan’s trade deficit narrowed sharply to JPY 378.7 billion in May 2026 from JPY 662.5 billion a year earlier, well below market expectations of JPY 564.6 billion, as exports outpaced imports. Exports rose 17% year-on-year to JPY 9,511.5 billion, accelerating from 14.8% in April while marking the strongest increase since November 2022 and exceeding forecasts of 16.2%. It was also the ninth straight month of sales increase, driven by resilient global demand for semiconductors despite Middle East tensions disrupting supply chains. Meanwhile, imports grew 12.5% to JPY 9,890.2 billion, up from April’s 9.8% gain but slightly below expectations of 12.8%. It pointed to the fourth straight month of import growth and the fastest pace since January 2025, driven by solid domestic demand following the government's late-2025 stimulus measures. Import growth remained robust despite a sharp decline in crude oil shipments following the closure of the Strait of Hormuz.

Japan’s trade balance swung to a surplus of JPY 301.9 billion in April 2026 from a deficit of JPY 149.5 billion in the same month a year earlier, sharply beating market expectations for a shortfall of JPY 29.7 billion. It was the largest trade surplus since November, as export growth continued to outpace imports. Exports surged 14.8% year-on-year to a near-record JPY 10,507.3 billion, accelerating from an 11.5% rise in March while marking the strongest growth in three months and exceeding the consensus of 9.3%, supported by robust demand from China, the U.S., ASEAN economies, and the EU. Meanwhile, imports increased 9.7% to JPY 10,205.4 billion, easing slightly from March’s 10.9% gain but still exceeding market forecasts of 8.3%. Import demand remained resilient, partly supported by the Japanese government’s sizeable stimulus measures introduced in late 2025. The latest reading marked the third consecutive month of import growth, although it was the softest pace in the sequence.

Japan’s trade surplus increased to JPY 667.0 billion in March 2026 from JPY 529.8 billion in the same month a year earlier, marking a second straight month in surplus as export growth outpaced imports. However, the latest figure fell short of market expectations for a JPY 1,106 billion gain. Exports rose 11.7% yoy to a record high of JPY 11,003.3 billion, beating forecasts of 11% and accelerating from February’s 4.0% gain. Growth was supported by strong demand from China, the EU, and ASEAN countries, alongside a modest rebound in shipments to the U.S. Meantime, imports rose10.9% to JPY 10,336.3 billion, surpassing forecasts of 7.1% and quickening from 10.3% in February. This was the fastest import growth since January 2025, on solid domestic demand after Tokyo’s sizeable stimulus rollout in late 2025. Looking ahead, Japan’s trade outlook remains uncertain amid the fallout from the Middle East conflict, as many shipments in March had already left the region before the escalation began.