Japan’s December Export Growth Slows as U.S.-Bound Shipments Fall
Japan’s export growth softened at the end of 2025, coming in below market expectations as shipments to the United States returned to a sharp decline after a brief rebound in the prior month. The data underscore how Japan’s trade performance remains highly sensitive to tariff uncertainty, shifting demand patterns, and evolving regional supply chains.
Exports rose 5.1% year on year in December, undershooting forecasts that had called for growth closer to the previous month’s pace. While overall shipments remained positive, the breakdown across major destinations highlighted a widening divergence between demand from the broader Asia region and weakening trade flows to the U.S.
The U.S. remains a key pressure point. Exports to the United States fell 11.1% in December, reversing an 8.8% increase in November. That November uptick had marked the first rise in U.S.-bound exports since early spring, offering a brief sign that the drag from trade friction might be easing. The renewed contraction in December suggests that the recovery in U.S.-linked demand is not yet durable, particularly as exporters continue to face uncertainty over the direction and implementation of import levies.
Trade conditions in 2025 were uneven. Exports weakened in the middle of the year as tariff concerns weighed on corporate planning and ordering activity. Momentum improved later in the year after a bilateral trade arrangement reduced certain duties to 15%, helping stabilize sentiment and supporting a late-year rebound. Even so, December’s figures show that lower headline tariff rates do not eliminate destination-specific volatility, especially when buyers remain cautious, and competition intensifies.
By contrast, shipments to parts of Asia were firmer. Exports to mainland China increased 5.6% year on year, while shipments to Hong Kong surged 31.1%. Exports to the wider Asia region rose 10.2%, reflecting relatively stronger regional demand, inventory rebuilding in certain categories, and continued cross-border trade within Asia’s manufacturing networks.
Imports also strengthened. Japan’s imports rose 5.1% year on year in December, accelerating sharply from the prior month’s 1.3% increase and exceeding market expectations. The pickup suggests a modest firming in inbound demand, although import growth can also reflect price effects and shifts in energy and raw-material purchasing patterns toward year-end.
Looking at the full year, Japan’s exports increased 3.1% in 2025, a softer outcome than the 6.2% expansion recorded in 2024. Trade with Japan’s two largest partners was notably weaker year over year, with exports to mainland China down 0.4% and shipments to the United States down 4.1%. Gains elsewhere helped cushion the impact. Exports to Hong Kong and Taiwan rose 17.8% and 15.1% for the year, partially offsetting the declines in the U.S. and China.
Several forces likely supported exports through 2025 despite the slowdown. Some shipments were front-loaded ahead of potential tariff changes, while the global artificial intelligence investment cycle continued to lift demand for selected categories of electronics, components, and machinery. A weak yen also remained a supportive factor by improving price competitiveness for exporters, even as it raised the cost of imports and complicated the inflation outlook.
The forward view remains uncertain. Higher U.S. import levies, destination-specific demand shifts, and intensified overseas competition could weigh on industrial output and export volumes. In addition, geopolitical strains in the region have raised the risk of trade disruptions and regulatory retaliation, adding another layer of uncertainty for firms with exposure to sensitive supply chains and strategic industries.
The trade report also arrives amid heightened political uncertainty at home. Japan is heading into a snap election in early February following the dissolution of the lower house. Markets have been closely watching the campaign because fiscal policy choices and currency dynamics could materially affect the export outlook. Expectations that policy could remain supportive of growth have helped underpin domestic equities, while the yen has stayed relatively weak, a combination often associated with more favorable conditions for exporters.
For now, December’s data reinforce a central theme for Japan entering 2026: exports are still growing, but the recovery is uneven across markets. Stronger demand across parts of Asia is helping stabilize the headline numbers, yet the renewed slide in U.S.-bound shipments shows how quickly trade momentum can shift when policy risk and external demand conditions remain unsettled.