Investing.com-- Japan clocked a bigger-than-expected trade deficit in January as improving domestic demand and a stronger yen sparked an outsized surge in imports, while export growth also slightly underwhelmed.
Trade balance fell to a deficit of 2.76 trillion yen ($1.8 billion), government data showed on Wednesday. The print was bigger than expectations for a deficit of 2.10 trillion yen, and reversed course from a 132.5 billion yen surplus in the prior month.
January’s trade deficit was driven chiefly by a bigger-than-expected jump in imports, as domestic demand improved, while the yen also strengthened. Imports jumped 16.7% year-on-year in January, more than expectations of 9.7%, and picking up substantially from the 1.7% seen in the prior month.
Domestic demand remained upbeat amid strong wage growth, which is set to continue in 2025. The yen firmed as the Bank of Japan hiked interest rates and struck a hawkish chord on further tightening.
Stronger-than-expected gross domestic product data for the fourth quarter pointed to continued resilience in the Japanese economy, especially in capital spending and export growth.
But Japanese exports grew less than expected in January, albeit slightly. Exports rose 7.2% y-o-y, less than expectations of 7.9% but still well above the 2.8% rise seen in December.
Exports were boosted by robust demand in the U.S. and China, while local exporters were also seen front-loading overseas shipments in anticipation of higher trade tariffs under U.S. President Donald Trump.