Japanese exports have fallen for four consecutive months, with trade with the United States experiencing the largest drop in four years.

Notice that Japan's exports fell for the fourth consecutive month, as President Trump's tariff policy continues to cast a shadow over global trade, especially the outlook for trade involving the United States. The Japanese Ministry of Finance reported on Wednesday that export value in August fell by 0.1% compared to the same period last year, with automobiles and steel being the main drag. The growth in shipments to Asia and the European Union helped limit the decline, as economists had previously predicted a 2.0% decrease. Meanwhile, Japan's exports to the US saw the largest drop in over four years. Overall, Japan's trade balance showed a deficit, with a deficit of 242.5 billion yen (1.7 billion US dollars). Imports decreased by 5.2%, while the consensus expectation was a 4.1% decrease. The latest decline in Japan's exports comes as global businesses continue to absorb the impact of Trump's trade policies. For export-dependent Japan, the impact of trade poses risks to the country's fragile growth, potentially disrupting the positive cycle of inflation, wage growth, and growth that the authorities are seeking. Takeshi Minami, chief economist at Norinchukin Research Institute, said: "The new tariff rate set by the US on goods such as automobiles is 15%, and the question is how Japanese companies will respond in the future. Companies outside of the automotive industry may also try to absorb the impact of tariffs by reducing costs. If this happens, profits will decline, putting pressure on small and medium-sized enterprises, which may make it difficult for wages to increase." The main reason for the overall decline in exports was a 13.8% decrease in Japan's exports to the US, with automobiles being the main drag. Exports to China decreased by 0.5%, while exports to Europe grew by 5.5%. The Trump administration's tariff hikes continue to disrupt global trade, despite agreements being reached. In late July, the US agreed to reduce tariffs on imported Japanese cars from 27.5% to 15%, and avoid adding a new 15% universal tariff on top of the previous tariffs, but these changes didn't take effect until September 16. In August, the US remained Japan's second largest destination for exports, after China. Export value to the US fell by 28.4% for automobiles, while export volume decreased by 9.5%, indicating that Japanese automakers are continuing to lower prices to maintain market share in the US. This is squeezing their profit margins and may impact their ability to sustain the pace of wage growth seen over the past two years. The impact on corporate finances may cause headaches for the Bank of Japan, as it continues to seek opportunities to gradually raise its benchmark interest rate. So far, strong wage growth has been a key factor behind the Bank of Japans normalization policy measures, and speculation about rate hikes has persisted due to inflation rates hovering at or above the 2% target level for over three years. Exports of steel to the US continue to face a 50% tariff, with export value falling by 26.2%, but export volume slightly increasing. This is another sign that exporters may be absorbing some of the tariff impact by lowering prices. Semiconductor and pharmaceutical exports decreased by 12.4% and 12.8% respectively. As part of the July agreement, the US provided Japan with security clauses in future sector tariffs that could impact these industries, meaning Japan will not be treated more harshly than any other country. The July trade agreement provided some relief to Japanese exporters, particularly automakers, but whether the new tariffs can be sustained will depend on how Tokyo implements the $55 billion investment mechanism which is a key pillar of the trade agreement. If Japan fails to fund projects through this tool, Trump could once again raise tariffs on Japanese goods. Japan's trade surplus with the US was 324 billion yen, which means it will continue to face pressure from Trump to narrow the gap, as the US president has long criticized this. While implementing bilateral trade agreements, Japan continues to face ongoing pressure from the US to do more through non-bilateral means. The US is urging its G7 allies, including Japan, to impose high tariffs on countries like India that purchase Russian oil, in an effort to persuade President Putin to end the Russia-Ukraine conflict.