By Makiko Yamazaki and Tim Kelly

TOKYO (Reuters) -Japan's exports fell in May for the first time in eight months as big automakers like Toyota were hit by sweeping U.S. tariffs, and the failure of Tokyo to clinch a trade deal this week will likely pile pressure on a fragile economy.

Prime Minister Shigeru Ishiba said after the Group of Seven summit in Canada on Tuesday his country had not reached a comprehensive tariff agreement with Washington as some disagreements persisted between the two nations.

Japan and the U.S. "explored the possibility of a deal until the last minute," he added.

Tokyo is scrambling to find ways to get Washington to exempt Japan's automakers from 25% automobile industry-specific tariffs, which are hurting the country's manufacturing sector. Japan also faces a 24% 'reciprocal' tariff rate starting on July 9 unless it can negotiate a deal with Washington.

Japan's automobile sector accounted for about 28% of the total 21 trillion yen ($145 billion) worth of goods the Asian country exported to the U.S. last year.

Its total exports in May dropped 1.7% year-on-year by value to 8.1 trillion yen, government data showed, smaller than a median market forecast for a 3.8% decrease, and following a 2% rise in April.

Exports to the U.S. slumped 11.1% last month from a year earlier, the largest monthly percentage decline since February 2021, dragged down by a 24.7% plunge in automobiles and a 19% fall in auto components, while a stronger yen also helped reduce the value of shipments. Exports to China were down 8.8%.

In terms of volume, however, U.S.-bound automobile exports dipped just 3.9%, indicating that the biggest Japanese exporters were absorbing the tariff costs.

"The value of automobile exports to the U.S. fell, but their volume did not drop that much," Daiwa Institute of Research economist Koki Akimoto said. "This indicates Japanese automakers are effectively shouldering the tariff costs and not charging customers."

So far major Japanese automakers have refrained from price increases in the U.S. to mitigate the tariff costs, except for Subaru (FUJHY) and Mitsubishi Motors (MMTOY, 7211.T).

"They are buying time right now to see the course of Japan-U.S. trade negotiations," Akimoto said. The absence of price hikes could affect their profits, but their fiscal base is generally solid, he added.

While Japanese stocks and the yen showed little reaction to the data, shares of car companies have come under pressure this year due to concern about the tariff impact.