Global Market | Japan exports extend growth streak, but oil price risks cloud outlook

Japan’s exports expanded for a sixth consecutive month in February, reflecting resilient global demand despite growing concerns over rising energy costs linked to geopolitical tensions in the Middle East.

Data released on Wednesday showed that total exports by value rose 4.2 percent year-on-year, outperforming market expectations of a 1.6 percent increase. The stronger-than-anticipated growth highlights continued external demand support for the world’s fourth-largest economy, as per a report by Reuters.

However, recent trade figures have been influenced by seasonal distortions. The timing of China’s Lunar New Year, which fell later than usual this year, led to a surge in shipments in January as exporters front-loaded deliveries. This had resulted in an inflated 16.8 percent jump in exports during that month, skewing the broader trend, according to Reuters.


A closer look at regional trade patterns reveals mixed momentum. Exports to the United States declined 8 percent in February compared to a year earlier, while shipments to China dropped 10.9 percent. In contrast, exports to the rest of Asia posted a modest 2.8 percent increase, indicating some resilience within regional markets, according to Reuters.

On the import side, Japan saw a 10.2 percent year-on-year rise in February, slightly below expectations of an 11.5 percent increase. The rise in imports reflects both steady domestic demand and the impact of higher commodity prices, particularly energy.

As a result, Japan recorded a trade surplus of 57.3 billion yen, equivalent to approximately $360 million. This marked a significant improvement compared to market forecasts, which had anticipated a sizable trade deficit.

The broader economic backdrop shows signs of gradual recovery. Revised data indicates that Japan’s economy grew at an annualised pace of 1.3 percent in the final quarter of 2025, supported by strong business investment. This suggests that corporate spending continues to underpin domestic activity.

Despite these positive signals, risks remain tilted to the downside. Analysts caution that surging oil prices, driven by geopolitical tensions, could weigh heavily on Japan’s economy, which is highly dependent on energy imports. Elevated energy costs not only strain trade balances but also contribute to inflationary pressures, raising concerns about stagflation.

In this context, monetary policy is expected to remain cautious. The Bank of Japan is widely anticipated to keep interest rates unchanged at the conclusion of its policy meeting, while maintaining a tightening bias. A weaker yen combined with higher import costs is adding to inflation concerns, even as policymakers remain mindful of the fragile recovery.

Overall, while export growth continues to provide support, Japan’s economic outlook is increasingly shaped by external risks, particularly those stemming from energy markets and global geopolitical developments.