Japan Trade Gap Widens Sharply

Japan's trade deficit widened sharply to JPY 634.5 billion in July 2026 from JPY 156.3 billion in the same month a year earlier, but was below market forecasts of JPY 680 billion. It was the third straight month of deficit and the largest since January as imports grew faster than exports. Imports surged 27.8% yoy to a new record JPY 12,146.3 billion, accelerating from June's 25.4% rise, beating estimates of 26.5%, and posting the strongest growth since November 2022. The sharp rise reflected solid domestic demand, boosted by the government's late-2025 stimulus. Crude oil imports jumped 87.8% as Japan diversified energy buying away from the Strait of Hormuz amid ongoing tensions. Exports rose 23.2% to a fresh high of JPY 11,511.8 billion, the strongest gain since October 2022, topping consensus of 19.9%. Outbound shipments grew for the 11th month, lifted by a weaker yen and robust demand for AI-related chips, despite risks from supply chain disruptions due to the Middle East conflict.

Japan's trade balance swung to a deficit of JPY 406.9 billion in June 2026 from a surplus of JPY 122.3 billion in the same month a year earlier, far exceeding market expectations for a JPY 120 billion shortfall. It was the second straight monthly trade gap, with imports outpacing exports. Imports surged 25.4% yoy to a record JPY 11,335.9 billion, accelerating from May's 12.5% rise, beating forecasts of 21.0%, and posting the strongest rise since November 2022. The sharp rise reflected solid domestic demand, boosted by the government's late-2025 stimulus measures. Crude oil imports jumped 59.3% as Japan diversified energy procurement away from the Strait of Hormuz amid ongoing tensions. Exports climbed 19.3% to a three-month high of JPY 10,929.0 billion, the strongest gain since November 2022, topping consensus of 18.6%. Export growth stayed resilient for a tenth month, lifted by a weaker yen and robust demand for AI-related chips despite supply chain disruptions from the Iran conflict.

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.