Japan’s trade data offered a rare upbeat signal in a more protectionist global environment. In November, Japan’s exports rose 6.1% year over year, beating expectations for a 4.8% gain, as government data showed. The key surprise was exports to the U.S., which rebounded for the first time in eight months with shipments up 8.8% year over year.
What changed. The tariff shock appears to be easing at the margin after a U.S. Japan trade deal in September set a baseline 15% tariff on most imports from Japan, down from earlier, steeper auto and broad-goods rates. A weaker yen also helped restore some pricing competitiveness, and exporters appear to have absorbed some tariff costs to defend share. That’s a sharp turn from the third quarter, when Japan’s economy shrank as exports slumped under tariff pressure.
The immediate market implication is monetary policy. Stronger exports and improved sentiment support the Bank of Japan’s view that tariff uncertainty is fading, increasing the odds of a near-term rate hike. Reuters noted the BOJ is widely expected to raise its short-term policy rate to 0.75% from 0.5% later this week, though the path after that remains less clear.
What to watch next is durability. Japan’s export momentum is now partly tied to U.S. demand for autos and pharma, but softness in the U.S. labor market could cap the rebound. If U.S. consumption cools further, Japan’s recent trade improvement could prove short-lived, even with tariff relief.
If you have exposure to Japan-sensitive cyclicals, keep one eye on BOJ guidance and another on U.S. demand data. The export rebound is real, but it is not yet self-sustaining.
