By Makiko Yamazaki
TOKYO, March 18 (Reuters) – Japan’s exports rose for a sixth straight month, data showed on Wednesday, pointing to resilient global demand, although industrial supply chain disruptions driven by the Middle East conflict loom as a risk to the world’s fourth-largest economy.
The oil shock triggered by U.S.-Israeli strikes on Iran has rattled governments and central bankers worried about the hit to economic growth.
In February, however, Japan continued to benefit from strong overseas orders. Total exports by value rose 4.2% year-on-year last month, data showed, exceeding a median market forecast for a 1.6% increase thanks to solid demand in Asia, although the shipments volume dipped 0.5%.
The challenge facing policymakers in Japan, and their counterparts globally, is that the Middle East war has dramatically shifted the risk profile for business, consumers and overall growth.
Japanese industries rely heavily on imports of energy to power the nation’s economy, so the disruptions for oil and other materials, if prolonged, “could eventually drag down Japanese exports,” said Koki Akimoto, economist at Daiwa Institute of Research.
With some Japanese chemical manufacturers already beginning to cut output due to limited supplies of naphtha, other industries could eventually be affected with a lag of a few months, he said.
Akimoto said the war could weigh on shipments of Japanese cars to the Middle East in the coming months.
ECONOMY IN MODEST RECOVERY MODE
The timing of China’s Lunar New Year has distorted trade data in recent months, as a later-than-usual holiday this year led to front-loading of shipments to the Asian powerhouse in January, inflating Japan’s overall exports by 16.8% in the month.
Exports to the United States dropped 8% in February from a year earlier, while those to China were down 10.9%, the data showed. Exports to the rest of Asia grew 2.8%.
Japan’s economy has shown modest recovery momentum, with growth in the final three months of 2025 revised up to an annualised 1.3% on the back of robust business investment.
But analysts warn that rising oil costs are stoking stagflation risks, potentially taking a toll on an economy heavily reliant on energy imports.
The Bank of Japan is widely expected to keep interest rates steady at a two-day policy meeting ending on Thursday, while signalling its resolve to maintain a tightening bias, as a weak yen and higher oil prices add to inflationary pressures.
Imports rose 10.2% last month from a year earlier, compared with market forecasts for an 11.5% increase. Japan recorded a trade surplus of 57.3 billion yen ($360.65 million) in February, compared with the forecast of a deficit of 483.2 billion yen.
“Looking ahead, in the short term we expect that the closure of the Strait of Hormuz will push up prices for crude oil and other goods imported from the Middle East, but import volumes themselves are likely to decline due to a contraction in overall imports,” Mizuho Securities market economist Yasuhisa Irie said in a note to clients.
($1 = 158.8800 yen)
(Reporting by Makiko Yamazaki; Editing by Sam Holmes & Shri Navaratnam)
