A cargo ship carrying containers is seen at an industrial port within Tokyo Port, Japan August 28, 2025. REUTERS/Issei Kato

By Makiko Yamazaki and Leika Kihara

TOKYO (Reuters) -Japan's exports rose more than expected in October for a second straight monthly gain, government data showed on Friday, underpinned by a milder fall in U.S.-bound shipments, resilient demand in other key markets and a weaker yen.

"Although the outlook of exports to the U.S. remains uncertain, it can be interpreted that the impact of U.S. tariffs has been limited," said Takeshi Minami, chief economist at Norinchukin Research.

The trade data, coupled with separate data showing persistently high inflation on Friday, supports the case for the Bank of Japan to raise interest rates further either in December or January, Minami said.

Total exports by value rose 3.6% year-on-year in October, data showed, more than a median market forecast for a 1.1% increase and following a 4.2% rise in September.

Exports to the United States fell just 3.1% from a year earlier, improving significantly after posting double-digit percentage drops for five consecutive months.

Exports to China were up 2.1%, while those to the rest of Asia grew 4.2%. Shipments to the European Union surged 9.2%.

Separate government data on Friday showed that Japan's core consumer prices rose 3.0% in October from a year earlier, staying above the central bank's 2% target and keeping alive expectations of a near-term interest rate hike.

The increase in the core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, matched a median market forecast and accelerated from a 2.9% rise in September.

Those reports follow separate data this week showing that Japan's economy contracted for the first time in six quarters in the July-September period due to a hit to exports from U.S. tariffs.

Relatively solid domestic demand was one of the bright spots in the soft third-quarter GDP figures, backed by strong capital expenditure and resilient private consumption.

The milder fall in U.S.-bound exports came after the U.S. and Japan formalised a trade agreement in September that implemented a baseline 15% tariff on nearly all U.S. imports from Japan, versus an initial 27.5% on autos and 25% for most other goods.

The agreement gave some relief to Japanese manufacturers, particularly automakers. Falls in automobile shipments to the United States proved limited in October, with a 0.9% drop in volume and a 7.5% decrease in value.

Norinchukin's Minami said, however, that the tariff impact could deepen in coming months.

"We've seen companies absorbing the tariff costs over the past six months, but as they begin to pass on the costs to U.S. consumers, there's a risk that U.S. consumers or producers could face an economic slowdown," he said.

Overall imports grew 0.7% in October from a year earlier, compared with market forecasts for a 0.7% decrease.

As a result, Japan ran a trade deficit of 231.8 billion yen ($1.47 billion) last month, compared with a forecast deficit of 280.1 billion yen.

($1 = 157.4400 yen)

(Reporting by Makiko Yamazaki and Leika Kihara; Editing by Shri Navaratnam and Tom Hogue)