Japan trade deficit narrows as exports rise 4.2% in September

Japan's trade deficit narrowed in September as export growth outpaced an increase in imports, provisional figures from the Ministry of Finance showed Wednesday.

Japan's trade deficit narrowed to JPY234.62 billion, or USD1.55 billion, in September from JPY306.09 billion in the same month a year earlier.

The trade deficit also narrowed month-on-month from JPY242.78 billion in August, however, the latest reading missed the FXStreet consensus forecast of a JPY22 billion surplus.

Imports rose 3.3% year-on-year in September, surpassing the 0.6% increase that was forecast.

Exports grew 4.2%, falling short of the expected 4.6% rise.

However, the reading marked the first increase in exports recorded since April, with shipments to China up 5.8% as exports to the US declined by 13%.

Min Joo Kang, ING senior economist, South Korea and Japan, said: "The US tariffs negatively affected exports to the US, but shipments elsewhere stayed strong, highlighting Japan's export resilience.

"We found that exports of machinery, electrical machinery, and transport equipment to the EU, Asia, and China were quite strong, but exports of iron and steel showed a decline across the globe. Overall, trade in iron and steel was hit by spreading tariffs from the US to the EU, sluggish construction activity, and severe price competition.

"We cautiously expect the gradual normalisation of exports to the US in the near term. We continue to believe that the Japanese economy will stay on the recovery path."