Japan

U.S. Total Exports

Total U.S. exports to Japan increased by $1.8 billion (3 percent) to $67.0 billion in 2014 (table JA.1). Export trends (product group increases or decreases) were generally affected by four factors: (1) larger exportable supplies of U.S. corn and more competitive prices led to a recovery in U.S. corn shipments to Japan, (2) declining fossil fuel prices and the continued shutdown of Japanese nuclear plants, (3) the Japanese consumption tax increase, and (4) a stronger U.S. dollar.¹

U.S. corn exports to Japan (excluding seed) increased by $800 million (45 percent) in 2014, as higher quantities were spurred by lower U.S. corn prices and larger volumes available for export. The United States has traditionally been the largest supplier of corn to Japan, accounting for 89 to 96 percent of Japan's imports during 2009–11.² However, U.S. suppliers lost market share in Japan starting in 2012 as drought affected U.S. corn production. Higher U.S. corn prices led to Japanese purchasers switching to alternative sources—such as Australia, Brazil, and Ukraine—and substituting other products in feed.³ However, more competitive U.S. corn prices and larger exportable supplies in 2014 led to a rebound in U.S. exports, with the volume of U.S. exports to Japan, excluding seed and popcorn, increasing by 91 percent.⁴

U.S. exports of natural gas and components to Japan increased (up $541 million, or 77 percent), while exports of petroleum products (down $375 million, or 24.5 percent) and nuclear materials (down $327 million, or 86.5 percent) fell (table JA.2). These trends reflect declining prices, expanding U.S. fossil fuel production, and a shift away from nuclear power in Japan. First, the increase in exports of natural gas and components reflects an increase in exports of propane and, to a lesser extent, natural gas. While Japan’s imports of propane have remained relatively flat (in quantity terms), U.S. production is increasing, and U.S. exports—which were among the lowest priced in the Japanese market in 2014—have gained market share compared to other Japanese import sources, particularly Saudi Arabia.⁵ Second, declining prices and a change in the product mix contributed to the decrease in the value of petroleum product exports.⁶ Third, Japan shut down its nuclear reactors following the March 2011 Tohoku earthquake and tsunami that led to the Fukushima Daiichi nuclear accident. The last operating reactor was taken offline in 2013, leading to lower imports of nuclear materials.⁷

There was also an increase in machinery exports (up $423 million, 12 percent), with the increase in exports spread across a number of different product groups. U.S. machinery exports to Japan were especially strong in the first quarter—exceeding imports in the first quarter of 2013 by 31 percent—as Japanese consumers and businesses bought domestic and imported products ahead of an increase in the consumption tax,⁸ which was raised from 5 percent to 8 percent in April 2014.⁹ The increase in the consumption tax also affected U.S. exports in other sectors. For example, U.S. transportation equipment exports to Japan were up 29 percent year over year in the first quarter, but down 23 percent in the second quarter as Japanese businesses and consumers pulled back on spending.¹⁰ The most significant export decline, in value terms, was in U.S. exports of medical goods (down $466 million, or 9 percent).¹¹ Largely because of the depreciation of the yen relative to the U.S. dollar, 2014 was the second straight year of declines in the value of medical device exports to Japan, following several years of significant growth.¹²

U.S. General Imports

The value of U.S. imports from Japan decreased by 3.3 percent in 2014 to $133.9 billion. This decrease was due in part to the 8.3 percent decline in the value of the yen against the U.S. dollar in 2014.¹³ Japan’s exports to the United States—in yen terms—increased as expected from a weakening currency, but not enough to offset the significant decline in the yen’s value when translated to U.S. dollars.¹⁴ The change in the exchange rate further explains the 9 percent ($12.5 billion) decline in imports during 2012–14. Over this same time period, the value of the yen declined 32 percent and U.S. imports from Japan—in yen terms—increased by 21 percent.¹⁵

The decline in U.S. imports from Japan also reflects the shift in motor vehicle production to North America. U.S. unit imports of motor vehicles from Japan reached their highest pre-recession level in 2013, but declined 6 percent in 2014 as Japanese companies increased their North American vehicle production. For example, in 2014, Mazda started production of the Mazda 2 and Mazda 3 in Mexico, while Honda began production in Mexico of the Fit; all of these were previously sourced from Japan.¹⁶

U.S. imports of computers, peripherals, and parts (down $403 million, or 9 percent) and consumer electronics (down $379 million, or 15 percent) from Japan also declined. The largest declines in the computer product group were the value of imports of printer parts and notebook computers. The value of notebook imports fell because of both lower prices and Japanese producers’ loss of market share.¹⁷ The decrease in imports of consumer electronics (down $379 million, or 15 percent) was primarily because of lower imports of digital cameras, as more consumers now use smartphones to take pictures. The unit value of U.S. digital camera imports actually rose, however, as Japanese producers increasingly focus on selling high-end cameras.¹⁸

Despite the overall decline in imports, there was a $1.0 billion (26.5 percent) rise in U.S. imports of aircraft, spacecraft, and related equipment and a $315 million (6.9 percent) increase in imports of internal combustion piston engines (other than for aircraft). These changes reflect a growing demand for certain finished products that use inputs from Japanese suppliers. The growth in aircraft imports, which is a continuation of a long-term trend, was driven by increased imports of parts for Boeing aircraft. Global deliveries of Boeing aircraft increased from 648 to 723 during 2010–14, including an increase in deliveries of the Boeing 787 “Dreamliner” from 65 to 114.¹⁹ Japanese firms are major suppliers of components for Boeing aircraft in general, and have an even larger role in supplying parts for the 787.²⁰ Japanese producers are also suppliers of internal combustion engines for the automotive, machinery, and marine industries, which all experienced U.S. production growth in 2014.²¹

U.S. Trade Balance

The U.S. trade deficit with Japan decreased by $6.4 billion in 2014 because of an increase in U.S. total exports and a decline in U.S. general imports. U.S. exports to Japan were affected by several factors. First, larger exportable supplies of U.S. corn and more competitive prices led to a recovery in U.S. corn shipments to Japan. Second, there were shifts in U.S. exports of energy products because of the decline in petroleum prices, the shutdown of nuclear reactors, and exports of competitively priced propane gaining market share in Japan. Third, Japan’s consumption tax increase in April 2014 likely contributed to substantially higher U.S. exports of machinery and other goods in the first quarter as consumers and businesses increased spending on domestic and imported products in advance of the expected hike. On the other hand, the decline in the value of the yen relative to the U.S. dollar led to a decrease in exports in some sectors as U.S. exports became more expensive to Japanese purchasers.The decline in the value of U.S. imports from Japan was primarily because of the depreciation of the yen against the U.S. dollar. Japan’s exports to the United States—in yen terms—increased as expected from a weakening currency, but not enough to offset the significant decline in the yen’s value when translated to U.S. dollars. Motor vehicles also contributed to the import decline as Japanese firms expanded production in North America. Some types of imports grew, however—particularly imports of inputs to U.S. production of civil aircraft and certain machinery and other transportation equipment.