Japan’s exports in May 2025 declined by 1.7% year over year, marking the sharpest drop since September 2024. While the decrease was less than the 3.8% forecasted by economists, it represented a reversal from the 2% growth seen in April. This decline reflects Japan’s ongoing challenges in navigating an uncertain global trade environment, driven by shifting international policies and economic headwinds.
Auto Exports Plunge as U.S. Tariffs Intensify Pressure on Japan’s Trade Outlook
A closer look at the data from Japan’s trade ministry highlights a significant drop in exports to major partners. Exports to the U.S. fell by 11.1%, while exports to China were down 8.8%. Particularly hard hit was the automobile sector: global auto exports fell 6.9%, and exports of motor vehicles to the U.S. plunged 24.7%. This steep drop is especially troubling given that auto exports comprised over a quarter of Japan’s exports to the U.S. in 2024.
Japan’s Export Slump Deepens as U.S. Tariffs Hit Auto Sector and Trade Talks StallTariffs have emerged as a central threat to Japan’s export outlook. Japan currently faces a 25% levy on auto and steel exports to the U.S., with an additional 24% tariff on all other exports scheduled to take effect on July 9. These trade barriers have significantly impacted Japan’s competitiveness, especially in its crucial automotive sector. Despite ongoing negotiations between Japanese and U.S. officials, no significant breakthroughs have been reached.
Economic Growth Slows as Trade Tensions Persist and Export Pressures Intensify for Japan
The export downturn has already had macroeconomic consequences. Japan’s GDP shrank by 0.2% in the March quarter, marking the first quarterly contraction in a year. The Bank of Japan warned in its recent policy statement that the country’s growth is expected to moderate further, citing weakening trade and declining corporate profits. The BOJ emphasized the unpredictable nature of global trade policies and their impact on overseas economies.
Efforts to resolve trade tensions have so far yielded limited progress. U.S. President Donald Trump recently commented that Japan was being “tough” in trade negotiations, following six rounds of unsuccessful talks. Meanwhile, Japan’s Prime Minister Shigeru Ishiba has underlined the importance of the auto sector as a national priority, indicating that Japan will likely push for concessions to protect this key industry. Analysts remain cautious, with Moody’s Stefan Angrick warning that a return to pre-Trump trade terms remains unlikely, suggesting continued pressure on Japan’s export performance in the coming months.
