Japan’s falling exports fuel recession concerns

By Burhan Sansarlioglu and Emir Yildirim

ISTANBUL (AA) — Falling exports in Japan for two consecutive months after its economy contracted in the first quarter spurred recession concerns, albeit limited by a satisfactory level of investments still flowing into the country.

The US and Japan have yet to reach a deal, and with no concrete progress in talks, the country remains among some of the most affected ones by US tariffs.

The Japanese economy contracted 0.2% in the first quarter of the year.

Japanese exports declined 0.5% and its imports climbed 0.2% in June, following a decline in exports by 1.7% in May. Meanwhile, Japan’s exports to the US fell 11.4% last month and auto exports to the US plummeted 26.7%, and Japanese steel exports fell 27% as well.

The Bank of Japan (BoJ) is expected to postpone rate hikes amid ongoing uncertainties, as the US is expected to announce new tariffs. US President Donald Trump previously said he was skeptical of an agreement to be reached with Japan.

Meanwhile, Japan’s corporate bankruptcies reached over 5,000 in the first half of the year, a first in 12 years, while its rising rice prices put pressure on consumers and politicians, fueling food security concerns.

The BoJ kept its short-term policy rate unchanged at 0.5% in June, within estimates, due to the moderate rise in inflation expectations and rice prices.

Trump’s pressure on Japan to import rice from the US further worsened the rice crisis in the country.

At the same time, Japan’s Consumer Price Index (CPI) climbed 0.1% month-on-month and 3.3% year-on-year in June, while the country’s core CPI rose 3.3%.

Suleyman Mete Ozbalaban, an Asia markets specialist, told Anadolu that the OECD forecast a 0.7% and a 0.4% growth in the Japanese economy for 2025 and 2026, respectively.

Ozbalaban stated that neither the global economy nor major economies are expected to see a contraction in the near term but whether Japan enters into a recession will be determined by corporate profits and sales estimates, and the outlook is not good with many firms expecting sales and operating profits to fall this year and next.

“Not a sharp decline but a moderate decrease is expected,” he said. “The BoJ’s quarterly survey showed that machinery and equipment investments into the country are expected to rise 14.3% this year and this positive level of private sector investments reduces the possibility of a recession.”