Japan's Trade Data and Upcoming Elections: An Economic Overview

Japan's export growth in December 2025 fell short of analysts' expectations, registering a 5.1% year-on-year increase. This was below the anticipated 6.1% growth, primarily due to a significant decline in shipments to the United States, which dropped by 11.1% after a brief recovery in November. The previous month had seen an 8.8% increase in exports to the U.S., marking the first rise since March 2025. In contrast, exports to mainland China, Japan's largest trading partner, rose by 5.6%, while shipments to Hong Kong surged by 31.1%. Overall, exports to the wider Asia region increased by 10.2%.

Japan's December exports growth drops to 5.1%, missing expectations, as shipments to U.S. plunge

Imports also saw a notable rise, climbing 5.1% year-on-year in December, a significant increase from the 1.3% growth recorded in November. This figure surpassed analysts' estimates of a 3.6% increase. For the entire year of 2025, Japan's exports grew by 3.1%, a decline from the 6.2% increase observed in 2024, with exports to the U.S. and China falling by 4.1% and 0.4%, respectively. However, gains from exports to Hong Kong and Taiwan, which rose by 17.8% and 15.1%, helped mitigate the downturn.

Japan's December exports growth drops to 5.1%, missing expectations, as shipments to U.S. plunge

The release of this trade data coincides with Japan's political landscape, as Prime Minister Sanae Takaichi has called for snap elections on February 8, 2026. The dissolution of the Lower House is set for Friday, and analysts suggest that a victory for Takaichi could facilitate the passage of her fiscal agenda with minimal opposition. This potential outcome is significant for Japan's economy, particularly in maintaining a weak yen, which supports the export-driven market.

Japan's December exports growth drops to 5.1%, missing expectations, as shipments to U.S. plunge

Since the announcement of the elections, Japanese markets have experienced what is termed the "Takaichi trade," characterized by rising stock prices and a continued weak yen. Economist Sam Jochim from Swiss private bank EFG noted that a strong win for Takaichi's ruling Liberal Democratic Party could lead to a more expansive fiscal policy following the approval of a record draft budget for the fiscal year starting in April. However, such a victory may also result in a sell-off of Japanese government bonds and the yen.

Japan's December exports growth drops to 5.1%, missing expectations, as shipments to U.S. plunge

While the trade data indicates a mixed performance, there is a discrepancy in the interpretation of the implications for Japan's economy. Some analysts emphasize the positive aspects of growth in exports to Asia, while others highlight the concerning declines in exports to the U.S. and China. The full impact of the upcoming elections on Japan's economic policies remains to be seen, with varying predictions on market reactions.

Japan's December exports growth drops to 5.1%, missing expectations, as shipments to U.S. plunge

• “[A win] poses the potential for a more expansive fiscal policy after a record draft budget was already approved for the fiscal year starting in April,” — Sam Jochim, Economist, EFG

Japan's December exports growth drops to 5.1%, missing expectations, as shipments to U.S. plunge