Japan's trade deficit narrowed to 1.15 trillion yen ($7.5 billion) in January, smaller than expected as exports surged 16.8% year-on-year, government customs data showed. The robust export growth, driven by strong demand across Asia, helped offset a 5% decline in shipments to the United States amid ongoing tariff pressures.

China remained Japan's largest export market despite diplomatic tensions, while shipments to Thailand, India, and South Korea also showed strength. Imports fell 2.5%, missing expectations for growth, as softer domestic demand reduced purchases from China, the U.S., and Europe. The combination of rising exports and falling imports contributed to the smaller-than-expected trade gap.

While Japan still recorded a trade deficit, the better-than-forecast results suggest resilience in the country's export sector despite global economic headwinds. The data comes as investors watch for signs of recovery in Japan's economy, with Asian markets providing a crucial buffer against weaker demand from traditional trading partners.