FX.co ★ Japan Trade Gap Narrows Sharply

In August 2025, Japan experienced a notable reduction in its trade deficit, which fell to JPY 242.5 billion from JPY 711.4 billion in the same month of the previous year, significantly undercutting market forecasts of JPY 513.6 billion. This change was primarily driven by a sharp decline in imports. Import levels decreased by 5.2% year-on-year, reaching a six-month low of JPY 8,667.7 billion, and signaled the second successive month of decline, aligning closely with expectations of a 5.2% drop. Concurrently, exports decreased slightly by 0.1%, marking their fourth consecutive month of decline. However, this was the least severe decline in the series, surpassing expected estimates of a 1.9% contraction, thereby indicating some resilience in the face of ongoing global trade challenges, such as the extensive tariffs imposed by the U.S.