Japan's February Export Growth Slows: China's Holiday and US Tariffs Create "Double Squeeze" on Foreign Demand

Financial Times APP learns that Japan’s export growth is showing signs of slowing down, mainly due to two major factors: first, U.S. tariff policies directly pressure Japanese car exports; second, China’s Spring Festival holiday leads to seasonal demand decline. According to data released by Japan’s Ministry of Finance on Wednesday, total exports in February increased by only 4.2% year-on-year. Although this is a significant slowdown from the rapid growth in the previous month, it still exceeds the median forecast of 1.9% by market analysts. Specifically, imports grew by 10.2% year-on-year, slightly below market expectations, turning Japan’s trade balance into a surplus—unadjusted trade surplus reached 57.3 billion yen.

In February this year, coinciding with the Lunar New Year holiday, Japan’s exports to China declined by 10.9% year-on-year. Semiconductor manufacturing equipment, plastics, and scientific optical devices all saw double-digit declines, becoming the main drivers of the drop in exports to China. However, it is worth noting that under strong demand related to artificial intelligence, shipments of semiconductors and other electronic components continued to grow.

Shinichiro Kobayashi, Chief Economist at Mitsubishi UFJ Research and Consulting, analyzed that the decline in exports to China is mainly affected by the Lunar New Year holiday. He also emphasized that although there are signs of localized slowdown in the U.S. economy, the overall global economic fundamentals remain stable, so Japan’s overall exports still maintain growth.

From a regional perspective, exports to the European Union performed well, with a year-on-year increase of 14%. Notably, exports of automobiles and machinery for construction and mining equipment saw significant growth, becoming the core drivers of export growth to Europe.

As these data are released, the global economy is facing chain reactions caused by the Middle East situation. The conflict that began in late February continues to intensify, with rising oil prices further increasing global inflation risks. Earlier this month, economic data showed that although yen depreciation provided some support to exporters, by the end of 2025, net exports are still expected to contribute zero to Japan’s economy.

Kobayashi expressed strong concern: “Uncertainty in the Middle East casts a shadow over the outlook. The war could disrupt key shipping routes, and companies need to be more vigilant about whether stable energy supplies can be maintained.”

Japanese companies are continuing to cope with the impact of U.S. tariff policies, while both countries are currently implementing the trade agreement reached last year—setting a cap of 15% on U.S. import tariffs on Japanese goods. In exchange, Japan has committed to expanding its investment in the U.S. to help revitalize American manufacturing.

Regarding February data, Japan’s exports to the U.S. declined by 8% year-on-year, mainly dragged down by automotive exports—down 14.8% in value. However, it is noteworthy that, by export volume, the decline in car exports was much smaller, indicating that Japanese manufacturers are actively lowering prices to defend their market share in the U.S. under tariff pressure.

As a core pillar of the $550 billion investment plan in the U.S., Tokyo officially launched the first batch of investments last month—this plan will inject up to $36 billion into the U.S. oil, natural gas, and critical minerals sectors, becoming an important substantive measure of the two countries’ trade agreement.

Ahead of Japanese Prime Minister Sanae Sato’s visit to Washington this week to meet with U.S. President Trump, officials from both sides continue negotiations on investment details. According to sources, the second batch of investment projects may focus on next-generation nuclear power technology.

According to the latest statistics from Japan’s Ministry of Finance, the average exchange rate of the yen against the dollar in February was 155.65, depreciating 0.7% compared to the same period last year, continuing the recent weak yen trend. Kobayashi analyzed that: “The persistent weakness of the yen will inevitably raise the costs of energy imports such as oil, directly increasing the pressure to widen the trade deficit.”