Japan logs 4.2% export rebound as U.S. shipments tumble double digits

Japan’s export machine came back to life in September 2025, climbing 4.2% year-on-year after four straight months of declines, according to data released by the Finance Ministry.

The recovery came with a huge asterisk though; exports to the U.S. cratered by 13.3%, dragging down momentum just as other Asian markets picked up steam. Demand from Asia rose 9.2% compared to the same month last year, with China leading the charge. Shipments to the mainland, still Japan’s biggest trade partner, jumped by 5.8%, offering some cushion for the blow from the American drop.

The semiconductor industry did most of the heavy lifting. Chip exports were up 12.6% by value from a year ago, giving tech players a reason to breathe. But auto shipments, the backbone of Japan’s trade with the US, got hammered again.

In September, vehicle exports to America fell by 24.2%, a hit, but slightly better than the 28.4% decline recorded in August. This freefall is largely due to the tariff war with Washington, which is still messing with the country’s most valuable export lanes.

Tokyo slashes tariffs but U.S. buyers still pull back

Back in July, the Japanese government reached an agreement with the White House, slashing the originally proposed 25% tariffs on exports down to 15%. That lower rate took effect on August 7, but it hasn’t helped much so far.

The damage had already soaked into the system by then. The export drop to the United States, Japan’s second-largest customer, wiped out any benefit expected from cheaper goods.

Imports didn’t sit still either. They reversed direction with a 3.3% gain in September after falling 5.2% in August. That beat the 0.6% growth forecast by economists polled by Reuters, with businesses restocking energy and machinery goods that had taken a hit earlier this year.

Hirofumi Suzuki, chief FX strategist and research head at Sumitomo Mitsui Banking Corporation, said that the numbers aren’t as great as they look. “Exports are not as strong as they appear on the surface,” Hirofumi said, pointing to the low base effect from last year. He also warned that the ongoing tensions between Washington and Beijing were making future trade unpredictable.

Takaichi takes office as weak yen lifts Nikkei, clouds fiscal outlook

The trade data landed one day after Sanae Takaichi took office as Japan’s first female prime minister, replacing Shigeru Ishiba after months of chaos inside the ruling Liberal Democratic Party.

The new leader has promised a massive fiscal spending plan paired with easy monetary policy, two things investors have already priced in. They’re calling it the “Takaichi trade.” Since she took over the LDP in September, the Nikkei 225 has been flying, reaching record highs this week.

The yen has dropped below 150 to the dollar, down from 147 in the same month last year. But Hirofumi isn’t sold on FX doing much heavy lifting for exports anymore. “Even though the yen was at quite weak levels against the U.S. dollar last year, we have yet to see a significant surge in exports. Policy factors such as tariffs seem to have a larger impact than FX on exports,” he added.

Investors have been watching the numbers closely after Japan’s economy did better than expected in the second quarter. GDP was revised up to 0.5% quarter-on-quarter from an earlier estimate of 0.3%, blowing past the 0.1% growth analysts expected.

Eyes are now on the Bank of Japan, which most economists think will raise its key interest rate to 0.75% sometime this quarter. In the Reuters poll taken between October 14 and 20, 60% of those surveyed (45 of 75) predicted a hike either in October or December. By March, 96% of economists expect borrowing costs to reach at least 0.75%.

Out of 35 economists who gave a specific month, 46% pointed to January, 31% to December, and 14% to October. The rate path is now a key question mark as Takaichi’s economic policies take shape.

She’s promised to boost government spending in essential sectors like energy and national security under what she’s calling “responsible, proactive fiscal policies.” But nobody knows what that really means yet.

In an extra question in the same Reuters survey, 67% of respondents, 18 of 27, said they couldn’t say if they supported or opposed her plan. Meanwhile, 17 out of 26 said they’re worried about what this means for Japan’s already fragile fiscal health.

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