Japan reports exports surged nearly 12% in January, thanks to strong demand for cars, auto parts and machinery.

Japan's exports jumped nearly 12% in January, stronger than expected, thanks to strong demand for cars, auto parts and machinery.

This helped Japan's trade deficit narrow to 1.76 trillion yen (12 billion U.S. dollars), about half the level of a year ago.

Imports fell for the second year in a row, dropping 9.6% from the previous year to a total of 9 trillion yen ($60 billion). The largest declines were in oil, gas and iron ore imports, partly due to lower prices but weak demand.

By region, exports to North America, the rest of Asia and the Middle East rose, while imports from all regions fell.

According to a preliminary report from the Ministry of Finance, exports totaled 7.3 trillion yen ($48 billion) in January, the second consecutive month of growth. Analysts had expected a growth rate of about 10%.

Exports to China rose 29%, thanks to strong demand for computer chip manufacturing equipment. Exports to the U.S. were up nearly 16% year-on-year, led by automobile exports, and exports to the European Union were up nearly 14% year-on-year.

Meanwhile, inbound tourism, which is statistically counted as an export, is steadily recovering after a couple of years in the doldrums of the epidemic, when Japan imposed severe restrictions on arrivals.

Despite the slowdown in the Japanese economy, exports remain relatively strong and will hit a record high of just over 100 trillion yen ($680 billion) in 2023.

In terms of nominal gross domestic product (GDP), Japan will be the world's fourth-largest economy behind Germany in 2023.

The country is also in a technical recession, with the economy contracting for the second consecutive quarter from October to December as consumers saved money to compensate for higher prices.