Japan Faces Fifth Consecutive Year of Trade Deficit Challenges

TOKYO – Japan finds itself grappling with a persistent trade deficit for the fifth consecutive year in 2025, as indicated by government data shared on Thursday. This ongoing economic challenge is exacerbated by the lingering concerns over the tariffs imposed by U.S. President Donald Trump and the nation’s strained political relationship with neighboring China.

The Finance Ministry’s preliminary figures reveal that Japan experienced a trade deficit amounting to 2.65 trillion yen, approximately $17 billion, throughout the year. Although this figure reflects a substantial reduction of nearly 53% compared to the previous year’s deficit, it remains a significant concern for the country’s economic stability.

Despite the deficit, there are some positive signs. Japan’s exports saw a 3.1% increase over the year, while imports experienced a marginal rise of less than 1%, maintaining a relatively stable balance.

In December alone, Japan managed to achieve a trade surplus of 105.7 billion yen, equivalent to $669 million. However, this monthly surplus was 12% lower compared to the same period the previous year, highlighting ongoing economic challenges.

During December, imports rose by 5.3% from a year earlier, slightly outpacing the 5.1% growth in exports, suggesting a potential shift in import-export dynamics as the nation navigates its complex international trade landscape.

By nation, exports in December declined 11% to the U.S., while growing to Britain, Africa and to some Asian points like Hong Kong and India. Imports remained strong from Europe but declined from Brazil and the Middle East.

The United States has imposed a 15% tariff on most imports from Japan, a reduction from the 25% that Trump initially proposed but an increase from before.

Another looming concern is the impact on Japanese manufacturing, including automakers, from China’s curbs on exports of rare earths.

The controls were announced by Beijing after Prime Minister Sanae Takaichi suggested a Chinese move on Taiwan could prompt a Japanese military response.

Takaichi may call elections for next month in hopes her party can gain strength in Parliament while she is popular with the public.

Overall, Japan’s economy has held up, despite grumbling from the public about rising prices and stagnant wages. The benchmark Nikkei on the Tokyo Stock Exchange keeps hitting new records.

___

Yuri Kageyama is on Threads: https://www.threads.com/@yurikageyama