Japan records surprise trade deficit in July as exports weaken further

Investing.com-- Japan unexpectedly swung into a trade deficit in July, with exports declining for a third consecutive month, as manufacturers grappled with weaker overseas demand amid shifting U.S. trade policies.

Japan’s trade balance saw a deficit of 117.5 billion yen ($800 million) in July, government data showed on Wednesday. The print defied expectations for a surplus of 196.2 billion yen, and reversed from the 152.1 billion yen surplus seen in the prior month.

The country’s exports shrank 2.6% year-on-year in July, against expectations for a 2.1% decline. Exports shrank for a third consecutive month, reflecting the sustained impact of U.S. tariffs on key sectors, specifically automobiles and steel.

Japan and the U.S. signed a trade deal last month, where U.S. President Donald Trump imposed a 15% reciprocal tariff on some Japanese imports, down from a previously threatened 25%.

Demand from China, Japan’s largest market outside the U.S., also showed signs of slowing as U.S. tariffs pressured growth and consumer spending.

Imports slumped 7.5% year-on-year in July after a 0.3% rise in the previous month. Still, the decline was less than the expected 10.4% drop.