Japan's exports fall for second straight month with no U.S. trade deal in sight, raising recession fears

• The decrease in exports was a reversal of the 0.5% rise expected by economists polled by Reuters
• Exports to the U.S. declined by 11.4% year over year, deepening from the 11% fall in May.
• Exports of automobiles to the U.S. fell 26.7% in June, extending May's 24.7% plunge.

Japan's exports in June contracted 0.5% year over year, extending the 1.7% drop seen in May as deliveries continued to decline for the second straight month.

The decrease in exports was a reversal of the 0.5% rise expected by economists polled by Reuters, and comes amid a lack of a breakthrough in trade talks with the U.S.

Exports to China, Japan's largest trading partner, were down 4.7%, while exports to the U.S. declined by 11.4% year over year, deepening from the 11% fall in May.

The data comes as Japan now faces a 25% “reciprocal tariff” from the U.S. that will take effect on August 1, one percentage point higher than the 24% announced on “Liberation Day.”

Early Wednesday, U.S. President Donald Trump reiterated that a 25% tariff would apply to Japanese imports, saying he does not expect to reach a broader deal with the country.

Since April 3, Japanese automobiles imported into the U.S. have also faced a 25% tariff.

However, data from the trade ministry showed that exports of automobiles — a cornerstone of Japan's economy — to the U.S., fell 26.7% in June, extending from May's 24.7% plunge.

Autos made up Japan's largest export to the U.S., or 28.3% of all shipments in 2024, according to customs data.

The additional tariffs could tip the export-dependent Japanese economy into a recession, analysts previously told CNBC.

Japan's economy contracted in the first quarter of the year compared to the previous quarter due to weakening exports, and another such contraction will see it meet the definition of a technical recession.

Exports — including services — made up almost 22% of Japan's GDP in 2023, according to the latest data from the World Bank.

On July 8, Japan's top negotiator Ryosei Akazawa reportedly said that any deal must include auto concessions for the country.

He also brushed aside any deadlines, including the U.S.' August 1 deadline, adding that he would not sacrifice Japan's agriculture sector for the sake of an early agreement.

U.S. President Donald Trump had taken aim at the country's rice sector on July 1, posting on Truth Social that Japan “won't take our RICE” despite a rice shortage in the country.

Japan had imported just over 350,000 tons of rice in 2024 from the U.S., with the U.S. being the largest exporter of rice to Japan in that year.