Japan Exports Hit 45-Year High in 2024, Trade Deficit Narrows by 44%

By TrendForce

2025-01-23

Japan's exports in December reached 9.91 trillion yen, a year-over-year increase of 2.8% (prior: 3.8%), according to the Ministry of Finance of Japan, marking the third consecutive month of growth. For the full year, exports totaled 107.1 trillion yen, up 6.2% year-over-year (prior: -6.8%), hitting the highest level since 1979.

Imports in December amounted to 9.77 trillion yen, rising 1.8% year-over-year (prior: -3.8%), with annual imports totaling 112.4 trillion yen, a 1.8% year-over-year increase (prior: -6.8%).

The trade balance in December turned positive for the first time in six months, reaching a surplus of 130.9 billion yen (prior: -117.6 billion yen). For the full year, the trade deficit narrowed significantly by 44% to 5.3 trillion yen.

The growth in December's exports was primarily driven by electrical and general machinery. Semiconductor and electronic components exports saw a year-over-year growth of 6.5% (prior: -2.3%). Semiconductor manufacturing equipment continued its growth trend but with a slightly reduced year-over-year growth rate of 10.6% (prior: 32.1%), indicating sustained global demand for semiconductors.

In contrast, transportation equipment underperformed, with automobile exports—the largest contributor within the category—declining further to -5.9% year-over-year (prior: -5.2%), remaining a major drag on overall export performance.

From a regional perspective, exports to China experienced a sharp decline of -3.0% year-over-year (prior: 7.1%), reflecting not only China's sluggish economy but also Japan's reduced semiconductor component exports to comply with U.S. chip restrictions, which saw a year-over-year decline of -10.4% (prior: 9.9%).

Exports to the United States also decreased, with a year-over-year decline of -2.1% (prior: -8.0%), reflecting continued weak automotive sales and uncertainty surrounding tariff policies. Despite this, Japan's annual trade surplus with the United States reached approximately 8.6 trillion yen, the fifth-highest on record, raising concerns over potential U.S. trade surplus sanctions against Japan.

The Bank of Japan (BOJ) is scheduled to hold its first monetary policy meeting of the year on January 24. Facing increased inflationary pressures from a weakened yen, ongoing corporate wage hikes, and U.S. President Trump's decision to delay tariff-related actions on his first day in office, the market widely anticipates the BOJ will raise interest rates by 25 bps to 0.5%. This expectation is further reinforced by BOJ Governor Kazuo Ueda's repeated comments that "rate hikes will be implemented if economic and price trends align with expectations."

Trump's Executive Orders at a Glance: From Tariffs to Immigration

U.S. President Donald Trump officially took the oath of office on January 20 and immediately signed a series of executive orders and memoranda addressing a wide range of issues, including immigration, trade, energy, federal personnel, national security, and gender and cultural policies : Trade and Economy Trump Announces 10% Tariff on China and 25% Tariff on Canada and Mexico (Effective February 4 for Canada) On February 1, Donald Trump announced the imposition of an additional 10% tariff on Chinese imports and a 25% tariff on goods from Mexico and Canada. For Canadian energy products, the tariff will be set at 10%, with implementation starting on February 4. These measures will remain in effect until issues related to illegal immigration and the influx of fentanyl are resolved. Establishment of an "External Revenue Service" Trump proposed creating a new agency to use tariff revenues to reduce domestic taxes, stating, "We will tax foreign goods, not the American people, for the benefit of the nation." Declaring an "Inflation Emergency" Federal agencies were directed to implement measures to expand housing supply, reduce healthcare costs, and create jobs while rolling back certain climate policies that have driven up energy and food costs. Withdrawal from the Global Minimum Corporate Tax Agreement Trump rejected the international minimum corporate tax agreement championed by the Biden administration, arguing it lacked formal congressional approval and was non-binding for the U.S.   Immigration Policy Southern Border Emergency and Military Deployment Declared a national emergency, deploying armed forces (including the National Guard) to secure the southern border and resuming construction of the U.S.-Mexico border wall. Mass Deportations and Enhanced Enforcement Advocated for the deportation of "millions of illegal immigrants," granting broader enforcement powers to ICE and CBP. Suspension of Refugee Resettlement Paused the refugee resettlement program, ended the "catch and release" policy, and planned to reinstate the "Remain in Mexico" program. Drug Cartels and Gangs Designated as Foreign Terrorist Organizations Groups like MS-13 and Tren de Aragua, along with Mexican cartels, were labeled foreign terrorist organizations, with plans to invoke the 1798 Alien Enemies Act to expel their members. Termination of Birthright Citizenship Issued an executive order ending automatic citizenship for children born to undocumented immigrants or those on temporary visas (e.g., tourist, student, or work visas).   Energy and Climate Withdrawal from the Paris Agreement and Expanded Oil and Gas Drilling Reaffirmed the U.S. withdrawal from the Paris Climate Agreement (formal withdrawal requires a year) and promoted offshore and Alaskan oil and gas development, pledging to "drill, baby, drill" and replenish the Strategic Petroleum Reserve (SPR). Ending Wind Energy Projects and EV Subsidies Ordered a halt to large-scale wind energy development and leasing, and terminated electric vehicle subsidies and related emissions exemptions.   Gender and Cultural Policies Binary Gender Policy and DEI Program Termination Declared that federal policy recognizes only two genders: male and female. Agencies were instructed to reflect biological sex on official documents, passports, and visas. Additionally, all Diversity, Equity, and Inclusion (DEI) programs within federal agencies were terminated.   Federal Government Creation of a Department of Government Efficiency Announced a new "Department of Government Efficiency" led by Elon Musk, with all federal agencies required to establish task forces to streamline processes and cut costs. Mandatory Return to Office and Hiring Freeze Ordered all federal employees to return to in-office work immediately and imposed a 90-day hiring freeze for federal civilian positions, excluding military, immigration, and national security roles. Withdrawal from the World Health Organization (WHO) Ordered the U.S. withdrawal from the WHO and halted funding, though formal exit requires a one-year notice and payment of outstanding dues. Regulation Freeze Directed all federal departments to halt drafting or issuing new regulations pending review by the administration or approval by appointed officials.   Other Mass Pardons for January 6 Capitol Riot Defendants Issued broad pardons for individuals involved in the January 6, 2021, Capitol riot, with 14 receiving sentence reductions. TikTok Ban Delayed for 75 Days Directed the Attorney General to delay enforcement of the TikTok ban by 75 days to ensure an orderly resolution while balancing national security concerns with the app's widespread use. Restoration of the Death Penalty Ordered the death penalty to be sought in cases involving the murder of law enforcement officers or violent crimes by undocumented immigrants, citing the need to protect Americans from violence.     -- (Photo Credit: Donald J. Trump)

2025-02-03

Key Focus This Week: U.S. ISM PMI & Nonfarm Payrolls

Last week, concerns over weakened AI chip demand surged after China's DeepSeek claimed to achieve ultra-low training costs, triggering a sharp selloff in AI and semiconductor-related tech stocks. This dragged down the S&P 500 Index, which declined 1% to close at 6,040.53 points. In the bond market, U.S. 10-year Treasury yields fell 7.4 bps to around 4.5%, driven by the slowdown in core PCE and Trump's proposed tariffs on China, Canada, and Mexico. Meanwhile, the U.S. dollar index rose to 108.1, as escalating trade war risks fueled safe-haven demand. Key Economic Data Last Week China PMI: China’s January manufacturing PMI came in at 49.1 (prior: 50.1), ending three consecutive months of expansion and falling short of market expectations of 50.1.Breaking down the data, seasonal factors related to Lunar New Year contributed to declines in production (49.8, prior: 52.1) and new orders (49.2, prior: 51.0), pushing both into contraction territory. Inventory (47.7, prior: 48.3) and employment (48.1, prior: 48.1) remained in contraction, while the new orders minus client inventory index slid further to 2.7 (prior: 3.1). Looking at historical January PMI trends, production and new orders typically decline 0.3–0.8 percentage points due to holiday effects but generally stay in expansion. However, this year’s declines of 2.3 and 1.8 percentage points, respectively, pushed both indicators into contraction, suggesting that policy stimulus measures introduced late last year were less effective than expected. This reinforces the urgency for China to expand fiscal stimulus in 2024. Read more at Datatrack   United States GDP: The Q4 2024 U.S. GDP growth rate came in at 2.3% QoQ annualized (prior: 3.1%), while full-year GDP growth stood at 2.8% YoY (prior: 2.9%). Breaking down the figures, personal consumption expenditure (PCE) remained robust, rising to 4.2% YoY (prior: 3.7%), contributing 2.82 percentage points to GDP growth. Within PCE, spending on goods (6.6%, prior: 5.6%) and services (3.1%, prior: 2.8%) both accelerated. The GDP slowdown was primarily driven by a decline in domestic investment (-5.6%, prior: 0.8%), subtracting 1.03 percentage points from growth. However, this was largely due to continued inventory drawdowns, which contributed -0.93 percentage points, highlighting the overall strength of the economy despite lower headline growth. Read more at Datatrack Federal Reserve Rate Decision: At its January FOMC meeting, the Federal Reserve unanimously voted to hold rates steady at 4.25%–4.50%. In its statement, the Fed removed the language stating that the "labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee's 2 percent objective." Instead, it revised its stance to "the unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated." This highlights the Fed’s stable outlook on economic and labor conditions but a slightly more cautious stance on inflation. On monetary policy adjustments, the Fed maintained its quantitative tightening (QT) pace, allowing $25 billion in Treasury securities and $35 billion in mortgage-backed securities (MBS) to mature monthly without reinvestment. Additionally, the Fed announced its five-year monetary policy framework review, set to conclude by late summer 2024. However, the 2% long-term inflation target remains outside the scope of this review. Read more at Datatrack Key Economic Data This Week United States ISM PMI: Due to Trump’s proposed tariffs on China, Canada, and Mexico, the market expects January manufacturing PMI to remain in contraction at 49.3. Meanwhile, services PMI is projected to hold steady at 54.1 (prior: 54.2). Read more at Datatrack U.S. Nonfarm Payrolls: With the labor market remaining stable, markets expect the unemployment rate to remain at 4.1% (prior: 4.1%) and nonfarm payrolls to increase by 156,000 (prior: 256,000), maintaining a healthy pace of job growth. Read more at Datatrack

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