On Wednesday, Japan’s benchmark Nikkei 225 index experienced a decline of 0.12%. In August, Japan’s exports experienced a contraction that was less severe than anticipated, driven by a rebound in shipments to its primary trading area — Asia. However, the overall growth remained in the negative territory for the fourth consecutive month. Japanese shipments experienced a decline of 0.1% year on year, in contrast to a more significant decrease of 2.6% observed in July.

This outcome was considerably less severe than the anticipated 1.9% contraction projected by economists. The country’s imports decreased at a moderated rate of 5.2%, in contrast to the 7.4% decline observed in July, yet surpassing the anticipated 4.2% drop. Exports from the world’s fourth-largest economy have declined, reflecting the challenges posed by U.S. tariffs and a slowdown resulting from the front-loading of exports earlier in the year. Japan is currently facing political uncertainty as Prime Minister Shigeru Ishiba prepares to resign, following electoral setbacks that resulted in the ruling Liberal Democratic Party losing its majority in both the lower and upper houses of parliament. Exports to Asia increased by 1.7% relative to the same timeframe last year, whereas shipments to Western Europe experienced a significant rise of 7.7%, which partially mitigated a more pronounced decline in exports to the U.S.

Outbound goods to the U.S. experienced a decline of 13.8% year on year, surpassing the 10.1% contraction recorded in the previous month. This follows a trade agreement with Washington in late July, which resulted in a reduction of tariff rates from 25% to 15%. Shipments of automobiles to the U.S. have continued to decline, experiencing a 28.3% decrease in value year on year, slightly better than the 28.4% drop recorded in July. In 2024, automobiles represented Japan’s most significant exports to the United States. Exports to the mainland China experienced a decline of 0.5% year on year; however, shipments to Hong Kong surged by 14.4%. China holds the position as Japan’s largest trading partner when evaluated on a single-country basis. The data arrives in advance of the Bank of Japan’s rate decision on Friday, with economists anticipating that the central bank will maintain rates at 0.5%.

Marcel Thieliant, head of Asia-Pacific at Capital Economics, indicated that although overall exports are currently “holding up” despite U.S. tariffs, there is a possibility that export volumes may decline in 2026 due to a slowdown in external demand. Although the 0.1% decline in exports fell short of analysts’ predictions, Thieliant remarked that the data were “less impressive than they look,” highlighting a recent downturn in new export orders reflected in Japan’s August manufacturing purchasing managers index.