Japan’s international trade data for August 2025 reveals a slight drop in exports, down 0.1% compared to the same month last year. This marks the fourth month in a row with a decline, although the drop was smaller than the expected 1.9% and follows a previous decrease of 2.6%. Imports fell by 5.2% year-on-year, which was better than the expected decline of 7.5%. This also reflects an improvement from the earlier reduction of 7.4%.

Trade Balance Deficit

The trade balance for August showed a deficit of 242.5 billion yen. This figure was better than the anticipated deficit of 513.6 billion yen and is an improvement over last month’s deficit of 118.4 billion yen. Overall, the latest trade data indicates that Japan’s exports are performing better than expected, yet the significant drop in imports points to domestic weakness. This situation suggests that the Bank of Japan is unlikely to raise interest rates soon, which may keep downward pressure on the yen. We have witnessed this trend throughout 2025, as hopes for policy changes have been delayed. Given these mixed signals, we could see more volatility in currency pairs such as USD/JPY. While recent data shows the US economy remains strong, ongoing economic challenges in China—a key export partner—limit optimism for a strong export rebound. The tensions between these major trading partners might make it wise to focus on options that benefit from price movements, rather than taking a specific directional bet.

Impact On Equity Traders

For equity traders, this data indicates a divided market for the Nikkei 225. The stable export figures benefit large companies focused on global markets, like automakers and electronics manufacturers. However, the decline in imports points to difficulties for domestic businesses, such as retailers and service providers. This weak domestic outlook supports our belief that Japanese government bond yields are likely to stay low. With domestic demand decreasing and August’s core inflation data showing a steady decline toward 2.5%, the Bank of Japan has little reason to tighten monetary policy. This environment should continue to support JGB futures prices in the coming weeks. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now