Japan's July Trade Deficit Shrank After Imports Fell Faster than Exports, Core Machinery Orders Rebound In June

Akira Ito
20 Aug, 2025
Tokyo

Japan's benchmark indexes declined for the second consecutive session, following a decline in tech stock on Wall Street in overnight trading. 

The Nikkei 225 Stock Average fell 1.5%, the broader Topix index declined 0.6%, and benchmark indexes extended the 2-day sell-off to 2.2%.

Market sentiment was cautious after Japan's exports fell for the third month in a row and dropped at the fastest pace since February 2021.

Exports in July fell 2.6% from a year ago, driven by an 11.4% decline in exports to the U.S., and shipments of vehicles, parts, and semiconductors slowed.

Goods shipments fell 2.6% to 9.4 trillion yen from 9.6 trillion yen, imports declined 7.5% to 9.5 trillion yen from 10.2 trillion yen, and the trade deficit shrank 81.3% to 117.6 billion yen from 628.3 billion yen a year ago. 

In July, exports to China declined 3.5%, to the European Union decreased 3.4%, and to the ASEAN region decreased 2.9%, according to the latest data from the Ministry of Finance. 

Japan's exports are likely to face additional headwinds after the U.S. sharply escalated tariffs to 15% from 2.5% and extracted a verbal pledge from Japan to invest $550 billion in the U.S. over an unspecified period. 

Japan's core machinery orders advanced from the previous month in June, the Japan's Cabinet Office said in a separate release.

Core machinery orders, though volatile, provide a forward-looking capital spending plan over the next six to nine months. 

Core machinery orders, which exclude volatile ship and power plant orders, rose 3% to 941.2 billion yen. 

On an annual basis, private sector machinery orders accelerated to a 7.6% increase in June from a 4.4% rise in May.

 

Japan Indexes and Stocks 

The Nikkei 225 Stock Average dropped 1.5% to 42,888.55, and the broader Topix declined 0.6% to 3,098.87. 

SoftBank Group declined 7.1% to ¥14,890.0, and the diversified investment group extended three-day losses to 16%. 

Heavy machinery makers fell despite June's machinery orders rebounding from a two-month slump.

Mitsubishi Heavy Industries decreased 2.2% to ¥3,823.0, IHI Corp. dropped 4.2% to ¥15,800.0, and Fujikura Ltd. fell 5.6% to ¥11,330.0. 

Semiconductor equipment makers led decliners following a sell-off in tech stocks in overnight trading on Wall Street.

Tokyo Electron declined 1.4% to ¥20,925.0, Advantest fell 5.7% to ¥10,765.0, and Disco Corp. decreased 4.9% to ¥39,300.0.