AI chip demand offsets soft US car exports, Japan's January exports see fastest growth in three years.

Due to the demand for chips related to artificial intelligence (AI) offsetting the weakness in US car exports, Japan's exports recorded the fastest growth in three years. The Japanese Ministry of Finance reported on Wednesday that the overall export value in January increased by 16.8% year-on-year, the biggest increase since November 2022, surpassing analysts' expectations of 13%. Among them, overall exports of semiconductors and other electronic components increased by nearly 40%. Takeshi Minami, Chief Economist at Norinchukin Research Institute, stated, "Some shipments related to semiconductors showed strong performance, possibly driven by the rise in demand for artificial intelligence. The data confirms that the impact of US tariffs is small, as the weak yen is helping Japanese exporters." By region, exports to China increased by 32%, exports to the European Union increased by 29.6%, while exports to the US decreased by 5%. However, the export data to China was distorted by the Spring Festival factor, as last year's Spring Festival fell in January. Takeshi Minami said, "Some special factors are at play, including advance shipments before the Spring Festival, so Japan's exports are not as strong as the headline figures suggest." "But it can be said that they may be gradually recovering." Furthermore, the value of exports of cars to the US decreased by 9.9%, while the number of exported cars only decreased by 0.8%. This gap indicates that Japanese car manufacturers facing Trump's tariffs continue to maintain their market share in the US market by lowering prices and sacrificing profits. The limited profit space resulting from this strategy may restrict these companies' ability to raise wages domestically. Although the yen has remained virtually unchanged compared to the same period last year, limiting its impact on the latest data, the yen is still weak by historical standards, supporting exports. According to Ministry of Finance data, the average exchange rate for the yen against the US dollar in January was 156.91, a 0.2% increase from the same month last year. Takeshi Minami added, "Exports will not continue to grow at this rapid pace and are unlikely to be the main drive of the overall Japanese economy. Growth in consumer spending is crucial, as inflation pressures are expected to ease." As these data are released, the World Trade Organization (WTO) has continuously strengthened its optimistic view of the global trade outlook. The WTO Director-General stated last month that the rapid development of artificial intelligence may support the growth of global commodity trade this year, helping to overcome the resistance caused by US tariffs. The data shows that as businesses overcome the impact of US tariffs, commodity exports continue to grow, alleviated by trade agreements reached last year. Japan and the US are working to implement Japan's commitment to increase investment in the US, a deal that also reduces tariffs on Japanese cars imported into the US. Japan plans to invest $36 billion in US oil, natural gas, and critical mineral projects, the first installment of the promised $55 billion. These plans are set to be announced ahead of Prime Minister Yoshihide Suga's visit to Washington and meeting with US President Trump in March.