Japan exports rise 16.7% for 13th straight month on AI chip demand, trade gap narrows

The trade data is broadly supportive for the yen and for the BOJ’s tightening case, with exports still growing strongly and firms passing higher costs through to prices. The narrowing deficit owes much to oil disruption rather than weaker demand: Houthi rerouting delayed crude arrivals, so the import bill is likely to rebound in October as Suez-routed tankers arrive and procurement returns to around year-earlier levels. That makes oil prices and Middle East shipping the key swing factor for Japan’s trade balance and the yen’s import-driven pressure in the months ahead. For the BOJ, solid external demand adds to the case for a December hike, with its 30 October meeting and fresh forecasts the next focus.Japan’s exporters are still riding the AI boom, but September’s narrower trade gap owes more to delayed oil tankers than to any lasting improvement.Summary:Trade balance (Sep): deficit of ¥536.6 billion vs ¥181 billion expected; prior ¥1,111.9 billionExports (Sep y/y): +16.7% vs +20.1% expected; prior +19.3%Imports (Sep y/y): +18.9% vs +19.6% expected; prior +28.0%Exports rose for a 13th straight month, driven by semiconductors and AI-related products and by firms passing on higher costsExports to the US rose 22.9%; shipments to China gained 8.6%Import growth slowed as crude deliveries were delayed by tanker rerouting away from the Bab el-Mandeb Strait; the government expects crude procurement to recover to around year-earlier levels in OctoberJapan’s exports rose 16.7% in September from a year earlier, extending their run of gains to 13 consecutive months as strong demand for semiconductors and AI-related products offset weakness elsewhere, Ministry of Finance data showed on Wednesday.The increase fell short of the 20.1% rise economists had expected and followed a 19.3% gain in August, but export growth remained robust. Solid global investment in artificial intelligence continued to support shipments of chips and related equipment, while companies’ efforts to pass higher costs on through prices also lifted the value of exports.By destination, exports to the United States jumped 22.9% from a year earlier, and shipments to China rose 8.6%.Imports climbed 18.9%, slightly below the 19.6% forecast and slower than August’s 28% surge. Oil was the main factor. Crude arrivals dropped after tankers rerouted away from the Bab el-Mandeb Strait, at the southern entrance to the Red Sea, when Yemen’s Iran-aligned Houthi militia declared a naval blockade against Saudi Arabia, delaying deliveries to Japan.The softer import bill helped narrow the trade deficit to ¥536.6 billion, about $3.4 billion, from roughly ¥1.1 trillion in August. That was still considerably wider than the ¥181 billion shortfall economists had forecast.The relief on imports is likely to prove temporary. The government said crude procurement in October is expected to recover to around 100% of the level a year earlier, as tankers travelling via the Suez Canal reach Japan, which would push the energy import bill back up.The figures suggest external demand remains a support for Japan’s economy, although uncertainty over the global outlook continues to cloud the picture for exporters.Attention now turns to the Bank of Japan’s policy meeting ending on 30 October, where it will publish fresh quarterly growth and inflation forecasts. Markets will scrutinise those projections for clues on the timing of the next rate rise, which most economists expect in December.  This article was written by Eamonn Sheridan at investinglive.com.