Japan Exports Rise at Fastest Pace in Over Three Years as AI Chip Demand Surges

Japan's exports rose 17% year-over-year in May, marking their strongest growth since November 2022, as booming demand for semiconductors and automobiles boosted overseas shipments.

The increase exceeded economists' expectations of 16.2% and accelerated from April's 14.8% growth, according to official trade data released Tuesday.

Semiconductor exports led the gains, surging 61.2% from a year earlier as global investment in artificial intelligence technologies continued to drive demand for advanced chips and related components. Automobile exports also remained strong, rising 16.4% year-over-year.

Exports to China, Japan's largest trading partner, climbed 17.9% in May, while shipments to the United States increased 12.5%, reflecting resilient demand from two of the country's key export markets.

Despite the strong rise in export values, shipment volumes increased only 0.5%, suggesting that currency movements and higher product prices contributed significantly to overall growth. The weak yen has continued to support Japanese exporters by improving the competitiveness of their products abroad.

Meanwhile, imports rose 12.5% compared with the same period last year, representing the fastest increase since January 2025, although slightly below market forecasts. Petroleum imports declined 28.5% amid ongoing geopolitical tensions in the Middle East.

The latest trade figures come shortly after the Bank of Japan raised its benchmark interest rate by 25 basis points to 1%, the highest level in more than three decades, as policymakers seek to manage inflation and stabilize the currency.

Economists said demand linked to artificial intelligence is expected to remain a key driver of export growth in the near term. However, concerns remain that slowing global economic activity could eventually weigh on broader demand for Japanese goods.

Japan's economy expanded 0.5% in the first quarter of 2026, supported largely by exports, reinforcing the sector's importance as a key engine of growth.

Separately, the Reuters Tankan survey showed business sentiment among large Japanese manufacturers improved in June, reaching its highest level in three months, indicating growing confidence within the country's industrial sector.

Source: Japan Ministry of Finance, Reuters