Exports from Japan, the world's 3rd largest economy, fell 2.4% from a year earlier to 7.2 trillion yen ($64 billion), while imports rose 1% to 6.7 trillion yen ($59 billion). The trade surplus dropped 32% from a year earlier to 528.5 billion yen ($4.7 billion), customs figures showed.
Exports to the U.S., Japan's biggest single overseas market, rose 4.4% while imports fell, increasing the politically sensitive trade surplus by nearly 10, to 683.6 billion yen ($6.1 billion), up 9.8% from the same month a year earlier.
Japan's exports to China fell 9.4% from a year earlier, reflecting lower demand as the economy slows amid a trade war with the U.S. over Beijing's technology ambitions. Darren Aw of Capital Economics said in a commentary that the deficit in March was not a significant concern and that overall, trade may have contributed to economic growth in the last quarter.
"The bigger picture, however, remains unchanged — the outlook for external demand remains weak," he said. U.S. Trade Representative Robert Lighthizer's office said in a statement that he and Japan's trade minister Toshimitsu Motegi agreed to continue talks soon.
In Tokyo, Chief Cabinet Secretary Yoshihide Suga told a regular news conference that he received a report from Washington that the two sides had started negotiations in line with an agreement last September between Trump and Prime Minister Shinzo Abe. The talks included trade in agricultural products and autos.
"I expect we will have constructive talks so that we have meaningful results that serve our national interest," he said. Motegi told reporters that he told Lighthizer that Japan will not compromise on imports of agricultural products, saying that the conditions agreed in past negotiations are as far as Japan could go.
Japan made significant concessions on imports of dairy and other farm products during tough negotiations on the Trans-Pacific Partnership, a Pacific Rim trade deal that President Donald Trump withdrew from shortly after taking office in 2017.
"In the area of agricultural products, conditions we have promised in past economic cooperation is as far as we can go. I have told him that that's the line Japan cannot go beyond," he said. Japan's conservative ruling party, the Liberal Democrats, have traditionally relied on strong support from rural voters and have sought to protect the country's farm sector from foreign competition.
Associated Press writer Mari Yamaguchi contributed.