Japan's Exports Rise 16.7% as AI Demand Meets a Rising Oil Bill

Strong chip sales leave Japan with another trade deficit

Japan's exports rose 16.7% in September 2026 from a year earlier, extending their growth streak to 13 months as semiconductor sales surged. Yet the country recorded a fifth consecutive monthly trade deficit because imports grew faster, with expensive crude oil keeping pressure on businesses and households.

The Finance Ministry's preliminary figures, released on October 21, put the September deficit at 536.6 billion yen. That was less than half August's roughly 1.1 trillion yen shortfall, but considerably larger than the market estimate of 181 billion yen. Imports increased 18.9% from a year earlier.

Japan's chip exports climbed 49.4% by value, while shipments of machinery used to manufacture semiconductors rose 43.9%. Automobile exports increased 15.1%, showing that the support extended beyond the equipment powering artificial intelligence.

A closer look at the figures reveals a weaker recent trend. Daiwa Institute of Research economists Anna Billing and Koki Akimoto said in their October 21 September trade analysis that export value fell 1.1% from August after seasonal adjustment, its first monthly decline in seven months. Export volume also fell, dropping 0.7% for a second consecutive month.

Seasonal adjustment removes recurring patterns, such as holiday closures, to make neighboring months easier to compare. September's exports were worth much more than a year earlier, while their latest monthly movement was downward. That combination matters for an economy supported by exports during the first two quarters of 2026.

AI demand supports chips and factory equipment

Japanese suppliers are benefiting from two connected parts of the AI investment boom: demand for semiconductors themselves and demand for the machinery needed to make them. Investment by South Korean chipmakers has supported orders for Japanese manufacturing tools.

Semiconductors are the electronic components that process and store information. Building more computing capacity for AI requires both more chips and factories capable of producing them. Japan sells into both stages, spreading the benefit across component makers and equipment manufacturers.

Takeshi Minami, chief economist at the Norinchukin Research Institute, said he expected this demand to continue:

Demand for AI-related products remains strong, with semiconductor exports rising, and I expect this trend to continue without any oversupply for the foreseeable future,

Power generation machinery exports also rose 22.6%. Together with stronger car shipments, that helped Japan maintain substantial annual export growth even as the pace slowed from August's 19.3% increase. September was the second consecutive month of slower growth after July's exceptionally strong performance.

Japan is also trying to build more advanced chip production at home. In April, Fujitsu's planned AI processor brought attention to its intention to use Rapidus to manufacture a 1.4 nanometer chip around the end of the decade. Rapidus is targeting mass production of 2 nanometer chips in the second half of fiscal 2027. Those plans concern future domestic capacity, while September's figures show the export business already supporting Japanese suppliers.

America leads annual growth, but monthly demand softens

Exports to the United States rose 22.9% from September a year earlier. Shipments to China increased 8.6%, while those to the European Union grew 10.5%. Automobile sales to Europe helped support the annual increase.

Japan recorded a trade surplus of 393 billion yen with the United States, meaning it sold more goods there than it bought. The bilateral trade agreement reached the previous year capped tariffs at 15% on most Japanese products in exchange for Tokyo's pledge to increase investment in the United States. Tariffs are taxes charged on imported goods, adding to the costs faced by buyers.

Daiwa's analysis found that export volumes to the United States and European Union fell from August, following the previous month's gains. Shipments to Asia increased, especially those to China. Falling exports of nonferrous metals, steel, buses and trucks weighed on total export volume.

The geographic pattern connects Japan's outlook to investment decisions made elsewhere. A slowdown in American AI spending could reduce orders for chips made in Asian economies and, in turn, weaken demand for the Japanese machinery used to produce them. Daiwa expects export volumes to remain broadly flat, with AI demand providing support while high interest rates weigh on customers in Europe and the United States.

Oil prices rise much faster than deliveries

Crude oil imports increased 51.1% by value in September, compared with a 3.1% rise in volume. Japan was paying substantially more for only a modest increase in the amount of oil arriving.

Daiwa said alternative procurement had brought September's crude oil volume slightly above its level a year earlier, despite continuing supply restrictions associated with the Middle East conflict. Import prices nevertheless remained elevated, adding pressure to the trade deficit.

Japan imports virtually all its oil, leaving transport, manufacturing and household costs exposed to disruption overseas. The war in Iran and severely restricted access to the Strait of Hormuz have pushed the country to seek other supplies. Brent crude rose from about $70 a barrel in February to above $110 in recent months, before trading around $100.

The sourcing shift was striking. The value of crude oil imports from the United States jumped about 820% from a year earlier. Imports from the Middle East rose just 1.5% by value even though the volume arriving from that region fell 30%. Japan was paying slightly more for substantially less Middle Eastern oil.

Minami also warned that oil costs were likely to remain high:

The situation in the Middle East is spiraling out of control, so high oil prices are likely to persist for some time.

Oil costs reach beyond filling stations. Fuel affects shipping charges, while petroleum is also used to make plastics and other industrial materials. Higher import bills can therefore feed into the cost of moving and manufacturing everyday goods.

Shipping disruptions complicate the monthly picture

Imports grew more slowly in September than in August, when their value had risen 28% from a year earlier. Delayed crude deliveries contributed to the slowdown as tankers rerouted away from the Bab el-Mandeb Strait, the southern entrance to the Red Sea.

Delivery timing helps explain why slower import growth can sit alongside an annual increase in crude volume. Ships arriving late can shift purchases between months, while the comparison with a year earlier measures a different period. Daiwa recorded a 1.9% monthly fall in the value of total imports after seasonal adjustment.

The government expected crude procurement in October to recover to around its level a year earlier as tankers traveling through the Suez Canal arrived. That makes the timing of deliveries relevant to the next trade release, alongside the price Japan pays for each shipment.

Hormuz and Bab el-Mandeb affect different parts of the journey. Hormuz connects the Persian Gulf with the open ocean, while Bab el-Mandeb leads into the Red Sea and the route toward Suez. Disruption can change both where Japan buys oil and how long cargo takes to arrive.

Japan's smaller September deficit therefore reflected slower import growth as well as continuing export strength. With crude prices still high, a recovery in arrivals could increase the import bill again even if exporters maintain their annual gains.

A record first half shows the larger imbalance

Japan exported 63.5 trillion yen of goods during April through September, the first half of fiscal 2026, up 18.4% from the same period a year earlier. Imports rose faster, increasing 20.4% to 66.3 trillion yen. Both totals were records.

The resulting deficit was 2.81 trillion yen, nearly twice the shortfall a year earlier. Imports exceeded exports by roughly 4.4% of the export total. The calculation uses the reported deficit and 63.5 trillion yen in exports; the published import and export totals are rounded.

September's improvement was substantial within that weaker six month picture. The monthly deficit narrowed by about 563 billion yen from August's roughly 1.1 trillion yen, a reduction of approximately 51%. Nevertheless, five consecutive monthly deficits show that stronger overseas sales have not kept pace with the cost of purchases from abroad.

The main dates and changes were:

• February 2026: Brent crude was around $70 a barrel before its subsequent rise.
• April through September: Japan recorded 63.5 trillion yen in exports, 66.3 trillion yen in imports and a 2.81 trillion yen deficit.
• August: Exports grew 19.3% and imports grew 28% from a year earlier.
• September: Export growth slowed to 16.7%, imports rose 18.9%, and the deficit narrowed to 536.6 billion yen.
• October 21: September trade figures and Daiwa's analysis were published, ahead of the Bank of Japan's policy meeting later in October.

The yen and interest rates add pressure

The yen averaged 157.43 per dollar in September, 6.7% weaker than a year earlier, according to the ministry figures. A weaker yen increases the Japanese currency cost of goods priced in dollars, including oil. Exporters can benefit when overseas earnings are converted back into yen.

Currency movements help explain why the value of trade and the physical amount shipped can move differently. A company can receive more yen for overseas sales even when its shipment volume changes little. For businesses buying imported materials, the same exchange rate movement raises costs.

The Bank of Japan was due to publish quarterly growth and inflation forecasts at its policy meeting later in October. The stated interest rate backdrop is inconsistent: an account of a September decision puts the benchmark at 1.25%, up from 1%, while polling ahead of the October meeting anticipates an unchanged rate of 1%. The current rate requires confirmation from the central bank's own decision.

For households, the immediate issue is purchasing power. Prime Minister Sanae Takaichi's government proposed reducing the food tax from 8% to 1%, with legislation under debate in Parliament. The proposal targets grocery costs as higher energy and import expenses strain family budgets.

What the next figures will clarify

Daiwa's expectation of broadly flat export volumes places the focus on whether AI orders can offset softer demand elsewhere. September's strong semiconductor figures sat alongside declines in materials and some vehicle categories, making the balance between industries important.

Market expectations also show how strong a result investors had anticipated. Export growth of 16.7% fell below a median forecast of 20.1%; another survey put the median at 21.3%. Import growth of 18.9% was below forecasts of 19.6% and 20.4%. Both sets of estimates anticipated faster trade growth than Japan recorded.

Japanese shares nevertheless advanced after the release, with the Nikkei 225 up 1.8% and the Topix gaining 1.14%. The next concrete checkpoints are the Bank of Japan's October forecasts and the arrival of delayed oil cargoes. For exporters, continuing chip orders offer support. For importers and households, the price of energy and the yen remain central to costs.

Key Points

• Japan's September exports rose 16.7% from a year earlier, marking 13 consecutive months of growth.
• Semiconductor exports increased 49.4%, chipmaking equipment rose 43.9%, and car shipments gained 15.1%.
• Seasonally adjusted export value fell 1.1% from August, while export volume declined 0.7%.
• Imports rose 18.9%, leaving a fifth consecutive monthly deficit of 536.6 billion yen.
• Crude oil import value climbed 51.1%, compared with a 3.1% increase in volume.
• The April through September trade deficit reached 2.81 trillion yen despite record export revenue.
• October oil deliveries and the Bank of Japan's upcoming forecasts are the next scheduled developments.