Japan's July exports hit record high on resilient global demand

Japan's exports reached an all-time monthly high in July, driven by robust overseas demand that continues to prop up an economy facing sluggish domestic consumption. Official data released on Thursday showed total export value climbed 23.2% from a year earlier to ¥11.5 trillion ($72.62 billion), surpassing the median market expectation of a 19.9% increase and accelerating from June's 19.3% growth.

The strong trade performance follows separate data earlier this week indicating that Japan's economy expanded for a third consecutive quarter in April-June, with exports offsetting weakness in private spending and business investment. This resilience may strengthen the case for the Bank of Japan to proceed with further monetary policy normalisation, with a potential rate hike as soon as September.

Shipments to the United States rose 22% year-on-year in July, while those to China grew by a stronger 25.8%. On the import side, inbound shipments increased 27.8% from a year earlier, slightly above the 26.5% forecast. The resulting trade deficit stood at ¥634.5 billion, narrower than the projected ¥680 billion shortfall.

The import bill has been inflated by higher energy and commodity costs. Disruptions to shipping through the Strait of Hormuz earlier this year, linked to the Middle East conflict, drove up crude oil and petrochemical prices. Although oil prices eased in June after partial restoration of shipping routes, the effect on import values tends to lag because customs-based prices reflect contracts signed weeks in advance.

These elevated input costs have also flowed through supply chains, enabling many Japanese manufacturers to pass on higher prices to overseas buyers. As a result, export values have been buoyed by price increases even as growth in shipment volumes remained modest.