USD/JPY pressured as Japan exports surge 17.7% to China despite import squeeze

USD/JPY faces downward pressure following Japan's stronger-than-expected trade data released on Tuesday. Japanese exports rose broadly, with shipments to China surging 17.7% year-on-year, while exports to the United States increased a more modest 3.4%. The headline export figures beat market expectations, signaling robust external demand for Japanese goods. However, imports also surprised to the upside, climbing 10.9% year-on-year versus the consensus forecast of 7.1%, driven by rising import costs that squeezed Japan's trade surplus. The mixed picture — strong exports but elevated import bills — complicates the outlook for the Bank of Japan, which continues to monitor inflationary pressures stemming from higher input costs. The stronger export performance supports the yen on a fundamental basis, as it reflects improved trade competitiveness and capital inflows. Traders should watch for near-term USD/JPY reactions around key support levels, as sustained export strength combined with potential BOJ policy normalization could maintain yen-supportive sentiment. The widening import bill, however, tempers the bullish yen narrative by eroding the net trade surplus improvement.