Unpacking Japan’s August trade data: AI Capex is powering the semiconductor export machine

• Semiconductor exports remained strong, with IC exports up 56.9% YoY, although the more modest 4.5% volume growth suggests pricing and product mix accounted for much of the increase.
• Semiconductor equipment is the stronger AI-capex signal: exports rose 40.1% YoY in value and 43.1% in volume, with volume growth accelerating from July, pointing to genuine capacity expansion by chipmakers.
• Japanese equipment makers stand to benefit the most: the data supports the earnings outlook for companies such as Tokyo Electron, SCREEN Holdings and Advantest, which are directly exposed to semiconductor capital expenditure.
• Japan is also ramping up AI hardware imports, with IC imports rising 93.2% YoY and imports from South Korea up 226.3% in value and 75.2% in volume, consistent with stronger demand for advanced memory and AI-related hardware.
• We remain constructive on Japanese equities, with the strongest outlook for semiconductor equipment companies, which are well positioned to benefit from sustained AI-driven semiconductor capex. Investors seeking exposure to this theme may consider the tech-heavy Nikkei 225, which offers 18.7% upside based on our FY2028 earnings projections.

Japan reported another strong set of trade data in August, with exports rising 19.3% year-on-year (YoY) to JPY10.05 trillion, extending the growth streak to 12 consecutive months. Imports grew even faster, increasing 28.0% YoY.

Much of the increase in trade value remains price-driven rather than volume-driven. Japan's World Export Quantum Index rose only 2.5% YoY, compared with a 16.4% increase in export unit values. On the import side, the World Import Quantum Index increased just 2.7%, versus a 24.7% rise in import unit values.

Semiconductor manufacturing equipment is the exception as they are showing strong volumes. This suggests that chipmakers, driven largely by AI demand, are stepping up spending on new production capacity and upgrades. For investors in Japanese equities, this is arguably the clearest positive signal in this month’s data.

Semiconductor exports are strong, but equipment volumes are the more important signal

Japan's Electrical Machinery category was the largest contributor to export growth in August, with exports increasing 31.5% YoY to JPY2.0 trillion. Within the category, semiconductor and electronic component exports rose 52.3%, while IC exports increased 56.9%, contributing approximately 3 percentage points to Japan's overall export growth.

The headline numbers are impressive, but they need to be interpreted alongside volumes. IC export volumes increased by only 4.5% YoY, substantially below the 56.9% increase in export value. This indicates that higher prices and product mix were major contributors to the increase in semiconductor export value.

That is consistent with tight supply-demand conditions in parts of the semiconductor market, particularly memory and other high-value products. However, from an equity perspective, higher semiconductor prices are not necessarily the same as stronger semiconductor capital expenditure. Pricing can boost the revenue of chipmakers without necessarily implying a proportional increase in wafer-fab investment.

The more significant signal for Japanese semiconductor stocks comes from a different trade category: Machinery, which includes semiconductor manufacturing equipment. Machinery exports rose 21.0% YoY to JPY1.8 trillion, while exports of semiconductor manufacturing equipment increased 40.1% in value and 43.1% in volume. Importantly, equipment volume growth accelerated from 36.2% YoY in July to 43.1% in August.

This is a much stronger indication of underlying demand. It indicates that Japanese manufacturers are shipping materially more semiconductor production equipment, consistent with semiconductor manufacturers around the world expanding capacity and upgrading their manufacturing processes.

Table 1: Top five contributors to export growth in August 2026

Rank	Category	Value (JPY million)	YoY%	Contribution (pp)	Key Drivers
1	Electrical Machinery	1,996,590	31.5%	5.7	Semiconductors +52.3%; ICs alone +56.9% (3.0pp on their own)
2	Machinery	1,770,147	21.0%	3.6	Semiconductor manufacturing equipment +40.1% value / +43.1% volume
3	Others (misc. manufactures)	1,757,263	11.7%	2.2	Scientific/optical instruments +19.5%
4	Manufactured Goods	1,105,827	18.5%	2.1	Nonferrous metals +29.9%; iron & steel +14.0%
5	Chemicals	1,070,231	18.5%	2.0	Organic chemicals +27.4%
Source: Ministry of Finance, Trade Statistics. iFast compilations. Data as of 31 August 2026.

For equity investors, therefore, semiconductor equipment exports provide a cleaner read-through to the AI investment cycle than the headline growth in semiconductor exports. Chip export values can be influenced by pricing and product mix, whereas equipment volumes provide a more direct indication that semiconductor manufacturers are actually expanding production capacity.

This is particularly relevant to Japanese companies such as Tokyo Electron, SCREEN Holdings and Advantest, which occupy critical positions in the semiconductor manufacturing and testing equipment ecosystem. When semiconductor manufacturers expand capacity or upgrade production technology, they require additional equipment across multiple stages of the manufacturing process.

The August data therefore provides tangible evidence that the AI investment cycle is translating into real capital expenditure across the semiconductor supply chain, rather than simply increasing the value of existing chip shipments.

Japan is also importing the hardware needed for its own AI build-out

The semiconductor story is not limited to Japan's exports. The import data shows that Japan is simultaneously increasing its purchases of the hardware required to build domestic AI computing capacity. Within Machinery, imports of computers and units increased 54.2% YoY in August. Imports from the US were particularly notable, rising 327.6% in value despite a 32.4% decline in quantity.

The combination of sharply higher value and lower quantity points to a substantial shift towards higher-value computing systems. Trade statistics do not identify individual products. However, the data is consistent with rising imports of high-value AI computing infrastructure such as Nvidia GB200 or GB300 systems rather than simply greater volumes of conventional computers.

This is relevant because Japan is investing in domestic AI and data-centre capacity. As Japanese technology companies, telecommunications operators and other infrastructure providers increase their AI-related investments, demand for high-performance computing systems should rise. In other words, Japan is participating in the AI capex cycle on both sides of the trade equation: exporting the equipment needed to manufacture semiconductors globally while importing the computing hardware and semiconductors needed to deploy AI domestically.

The semiconductor import data is even more striking. Japan's IC imports increased 93.2% YoY, with imports from South Korea rising 226.3% in value and 75.2% in volume. South Korea is home to Samsung Electronics and SK Hynix, two of the world's leading memory manufacturers and major suppliers of DRAM and high-bandwidth memory (HBM), which are critical components in AI computing systems. The sharp increase in Korean semiconductor imports is therefore consistent with stronger demand for advanced memory as Japan and its technology companies expand AI-related computing infrastructure.

Table 2: Top five contributors to import growth in August 2026

Rank	Category	Value (JPY million)	YoY%	Contribution (pp)	Key Drivers
1	Mineral Fuels	2,463,655	38.4%	7.8	Crude petroleum +58.7% (5.1pp); LNG +29.7% (1.5pp); coal +22.8% (0.8pp)
2	Electrical Machinery	1,893,171	40.8%	6.3	Semiconductors +82.1%; ICs +93.2% (3.0pp on their own)
3	Machinery	1,225,048	35.1%	3.7	Computers/units +54.2% (1.9pp)
4	Chemicals	1,116,582	28.7%	2.9	Medical products (pharma) +22.2%
5	Others	1,474,900	19.1%	2.7	Clothing, furniture, bags
Source: Ministry of Finance, Trade Statistics. iFast compilations. Data as of 31 August 2026.

Japan sits on both sides of the AI semiconductor supply chain

Taken together, the August trade figures highlight an important structural feature of Japan's position in the AI ecosystem. Japan is highly competitive in the equipment and manufacturing technology layer of the semiconductor value chain. Japanese companies also have meaningful positions in selected semiconductor and electronic components markets. These include Sony in image sensors, Renesas and ROHM in power and other semiconductor products, and Kioxia in NAND flash memory.

However, Japan remains dependent on overseas suppliers for some of the most important components required for the latest generation of AI infrastructure. In particular, Japan does not have a comparable domestic position in leading-edge logic, DRAM or HBM. The surge in semiconductor imports from South Korea therefore highlights a corresponding dependency on overseas memory suppliers.

The same applies to high-end computing systems. The sharp increase in the value of US computer imports, despite lower quantities, points to rising demand for sophisticated computing hardware that Japan does not yet manufacture domestically at sufficient scale.

This creates an interesting two-sided dynamic for Japanese equities. Japan benefits from AI investment when global semiconductor manufacturers expand capacity, because Japanese companies supply many of the tools and technologies required to build those fabs. At the same time, Japan remains a customer of the global semiconductor industry, importing advanced memory and computing hardware to support its own AI build-out.

This is also why initiatives such as Rapidus' planned 2nm logic production and TSMC's operations in Kumamoto are strategically important. Over time, greater domestic semiconductor production could reduce some of Japan's reliance on overseas supply, although meaningful production at the leading edge will take time to scale.

For investors, the more immediate takeaway from the August trade data is that the AI investment cycle is already generating real demand for Japanese semiconductor equipment. The acceleration in equipment export volumes is particularly encouraging because it provides evidence of capacity expansion rather than merely higher semiconductor prices.

As global AI infrastructure spending remains elevated, this should continue to support the earnings cycle for Japanese semiconductor equipment companies. At the same time, the sharp increase in semiconductor and high-end computing imports highlights the other side of the equation: Japan remains dependent on overseas suppliers for critical parts of the AI hardware stack.

For Japanese equities, this makes semiconductor equipment one of the clearest channels through which the global AI investment cycle can translate into domestic corporate earnings. The Nikkei 225, with its significant exposure to semiconductor and semiconductor equipment manufacturers, is well positioned to benefit from continued AI-related investment and the structural growth of the global semiconductor industry. We maintain our target of JPY77,180 by FY2028 (FY ended 31 March 2029), representing 18.7% upside from the closing level on 18 September 2026.

Table 3: Recommended Products

Categories	Products
ETF	·         Xtrackers Nikkei 225 UCITS ETF 1D (LSE: XDJP)
Unit Trusts	·         Amova Japan Equity SGD

Table 4: Nikkei 225 earnings growth projections

	FY2025	FY2026E	FY2027E	FY2028E
PE Ratio (X)	27.9	22.8	19.5	16.8
Earnings Growth	28.7%	22.5%	17.0%	15.7%
Earnings Per Share	2,329	2,852	3,336	3,859
Dividend Yield	1.2%	1.5%	1.7%	1.9%
Target Price (JPY) (Based on fair PE ratio of 20X)				77,180
Upside Potential				18.7%
*Each fiscal year ends 31 March. FY26 refers to the 12-month period ended 31 March 2027. Source: Bloomberg Finance L.P., iFAST Compilations. Data as of 18 Sept 2026.

Declaration:

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.