Japan exports post strongest growth in over three years on chip and auto demand

Tokyo: Japan’s exports recorded their fastest growth in more than three years in May, driven by robust global demand for semiconductors and automobiles, according to government data released this week.

Overall exports rose 17% year-on-year, accelerating from a 14.8% increase in April and surpassing market expectations of 16.2%. The latest figure marks the strongest export expansion since November 2022, the Finance Ministry data showed.

The surge was largely fueled by a sharp increase in semiconductor shipments, which jumped 61.2% in value terms compared to the same period last year. The growth reflects sustained global demand linked to artificial intelligence and advanced technology supply chains.

Automobile exports also remained strong, rising 16.4% year-on-year, contributing significantly to Japan’s overall export performance.

By destination, exports to China—Japan’s largest trading partner—increased 17.9%, while shipments to the United States rose 12.5%. However, exports to the Middle East declined 32%, reflecting disruptions in regional trade flows linked to ongoing geopolitical tensions.

Despite the strong headline growth in value terms, export volumes rose only 0.5%, suggesting that much of the increase was driven by higher prices and the impact of a weaker yen, which improves export competitiveness but raises import costs and inflationary pressures domestically.

Imports increased 12.5% year-on-year in May, marking the fastest growth since January 2025, though slightly below expectations of 12.8%. Petroleum imports fell 28.5%, affected by disruptions associated with instability in the Middle East.

The trade data was released shortly after the Bank of Japan raised its policy interest rate by 25 basis points to 1%, the highest level in over three decades, as policymakers moved to address persistent inflation and continued weakness in the yen.

Japan’s economy expanded by 0.5% quarter-on-quarter in the first quarter of the year and grew 1.8% on an annual basis, with exports remaining a key driver of economic performance.

Following the release of the data, Japan’s Nikkei 225 index rose 0.72%, while the yen remained broadly stable at around 160.4 against the US dollar.