Japan’s exports rose sharply in July, fueled by strong demand for semiconductors and AI-related technology. Imports reached a record high due to rising oil costs, according to official trade data released Thursday.
The value of exports increased 23.2% from a year earlier to 11.5 trillion yen ($72.6 billion), surpassing market forecasts. Imports climbed 27.8% to 12.1 trillion yen, setting a new high for the second month in a row.
Oil imports rebound as Middle East disruptions ease
Crude oil drove the import surge, with volumes rising 5.5% year-on-year—the first increase in four months. The total value of oil imports jumped 87.8%, reflecting higher prices and a shift toward more expensive U.S. crude as Japan diversifies supply sources.
Earlier disruptions in the Middle East had affected shipping routes, particularly through the Strait of Hormuz, pushing up global oil prices. Though some routes reopened, the impact on Japan’s import costs remained, as customs data reflects contracts signed weeks earlier.
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“The recovery in crude volumes, combined with persistently high oil prices and larger shipments of pricier U.S. crude, has increased import values,” said Koki Akimoto, an economist at Daiwa Institute of Research.
Japan’s trade deficit narrowed slightly to 634.5 billion yen in July, beating the 680 billion yen forecast. Still, high import costs continued to weigh on the economy.
Exports ride AI demand, weak yen
Semiconductors and components for AI data centers boosted exports, particularly to the U.S. and China. Shipments to the U.S. rose 22% year-on-year, while those to China increased 25.8%.
A weaker yen made Japanese goods more competitive abroad but also raised import costs, adding to inflation. Producer prices in July climbed 7.2% from a year earlier, driven by higher energy and commodity expenses.
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The trade figures arrived as Japan’s economy grew for a third consecutive quarter in April-June. Exports helped offset weak domestic consumption and business investment, providing a critical lifeline for an economy struggling to regain momentum.
This complicates the Bank of Japan’s efforts to adjust monetary policy. The central bank may raise interest rates as soon as September, a move that could strengthen the yen but also slow export growth.
The data highlights Japan’s economic divide: strong external demand supports growth, while the record import bill exposes vulnerability to global commodity markets.
Oil prices have eased from earlier highs, but customs data lags mean the full effect won’t appear in trade figures for weeks. Until then, import costs and the trade deficit will likely remain high.