Export decline raises risk of technical recession in Japan

Japan’s exports fell for the second consecutive month in June, declining by 0.5% year-on-year amid US trade policy changes and new tariffs. The drop surprised analysts who had anticipated growth. Key sectors were hit hard, with auto exports falling 27% and steel shipments dropping 29%. While passenger car export volumes rose 4.6%, their value decreased as manufacturers cut prices to offset tariff impacts.

The export slowdown to the United States, Japan’s largest trading partner, has raised concerns about the country’s economy. A prolonged trade contraction could trigger a technical recession if the country's GDP shrinks for two straight quarters. Takeshi Minami of Norinchukin Research Institute warns that instability from Washington’s trade policies continues to pose recession risks. Despite seven trade delegation visits, Japan has yet to secure tariff reductions with the US.

The yen’s appreciation against the dollar has further pressured exports. Minami cautions that potential American tariff increases to 25% could severely hurt corporate profits, potentially affecting employee wages and bonuses.