A sharper-than-forecast trade deficit narrowing to 378.7 billion yen bolsters expectations for Bank of Japan policy normalization.
Japan’s exports grew 17% year-on-year in May, exceeding forecasts and marking the fastest expansion since late 2022. The trade deficit narrowed to 378.7 billion yen, below the 564.6 billion yen consensus, driven by surging semiconductor demand and resilient AI-related shipments.
Semiconductor exports jumped 61.2%, while car shipments rose 16.4%. Imports climbed 12.5%, slightly below expectations. Exports to China and the U.S. grew, but Middle East shipments fell 32% amid regional tensions.
The yen showed little reaction to the data, though the narrower deficit may provide modest support. Energy import costs could rise if Hormuz disruptions ease under the US-Iran framework.