Japan trade gap narrows sharply

Japan’s trade deficit decreased significantly to JPY 242.5 billion in August 2025 from JPY 711.4 billion in the same month a year earlier, well below market expectations of JPY 513.6 billion, mainly due to a steep drop in imports.

Purchases shrank 5.2% year-on-year to the lowest amount in six months of JPY 8,667.7 billion, marking the second consecutive monthly decline.

The fall exceeded market expectations for a 4.2% contraction, underscoring sluggish domestic demand and persistently high input costs—despite Tokyo’s efforts to stimulate consumption and ease energy prices.

Meanwhile, exports slipped 0.1%, their fourth consecutive fall but the mildest in the streak, beating estimates of a 1.9% contraction and showing some resilience despite persistent headwinds from broad U.S. tariffs.