Japan recorded a trade surplus of 57.3 billion yen ($360 million) in February, reversing a deficit from the previous month, according to government data released on Wednesday. Exports grew by a better-than-expected 4.2% year-on-year to 9.57 trillion yen, while imports rose 10.2% to 9.51 trillion yen, the Finance Ministry's seasonally adjusted preliminary data showed.
The trade surplus came despite a sharp decline in shipments to China, which fell 10.9% year-on-year, partly due to the Lunar New Year holidays falling in February. Exports to the United States also dropped 8%, weighed down by a fall in auto shipments amid President Donald Trump's 15% tariffs on Japanese cars. However, exports to Europe grew 17%, and those to the rest of Asia rose 2.8%.
Import costs are expected to rise further as the effective closure of the Strait of Hormuz due to the war against Iran drives up oil prices. Japan imports almost all its oil, and Brent crude has jumped to around $100 a barrel in recent weeks. A weak yen, trading at about 159 yen to the US dollar compared with below 150 yen a year ago, is likely to support exports.
Geopolitical uncertainty, particularly the war in Iran, poses risks for Japan's export-reliant economy. Investors are closely watching the Bank of Japan's two-day policy meeting concluding on Thursday for any changes to interest rates. Tim Waterer, chief market analyst at KCM Trade, noted that central banks are assessing whether elevated oil prices are temporary or a sustained trend, which could shift global monetary policy from dovish to hawkish.
Investors are also awaiting the outcome of the summit later this week between President Trump and Japan's Prime Minister Sanae Takaichi, the country's first woman prime minister, for potential trade deals.
