Japan's export growth reached its quickest pace since October 2022, fueled by robust demand for semiconductors and automobiles, along with the benefit of a weaker yen. Data released by the Ministry of Finance on Thursday revealed that exports climbed 23.2% year-on-year in July, surpassing June's 19.3% increase and exceeding the median economist forecast of 20.1%.

Imports also saw a significant uptick, rising 27.8% year-on-year in July, outpacing June's 25.4% gain and beating the predicted median of 25.1%. The unadjusted trade deficit expanded to 634.5 billion yen from a revised 409.9 billion yen in June, marking the third consecutive month of shortfall.

The trade figures suggest that Japanese manufacturers have thus far largely withstood the economic shocks from the Middle East conflict, offering encouraging signs after domestic demand weakness caused second-quarter growth to underperform expectations. Strong global demand for AI-related products has emerged as a primary driver of Japan's export momentum, with electronics shipments including semiconductors surging approximately 49% and passenger car exports rising 21%.

The yen's depreciation has further enhanced the competitiveness of Japanese goods in overseas markets, with the currency touching its weakest level against the U.S. dollar in four decades last month.