950815

Japan's trade

surplus shrinks

sharply

TOKYO: Japan's huge trade surplus shrank sharply in July, and economists said the politically sensitive imbalance was likely to continue decreasing as the yen's jump earlier this year was dampening Japanese exports.

The finance ministry said on Tuesday that the nation's overall customs-cleared trade surplus narrowed to $9.43 billion in July from $12.25 billion a year earlier. The data was not adjusted for seasonal factors.

Japan's trade surplus with the United States, its largest trading partner, also decreased to $3.87 billion from $5.62 billion a year earlier.

"Japan's trade surplus is on a declining trend, with the effect of the yen's rise starting to depress the volume of exports," said Takumi Tsunoda, an economist at Yamaichi Research Institute of Securities and Economics Inc.

The overall trade surplus in July came just below the bottom of economists' forecasts, which had ranged from $9.5 billion to $12.2 billion.

"I was very, very surprised because it (the trade surplus) was exactly at the lowest forecast," said Makoto Kojima, director of global markets at Barclays Bank.

Measured in yen terms, the overall trade surplus was 811.06 billion yen in July, down from 1.22 trillion yen a year earlier.

A senior official at the ministry told a news conference that the trade surplus was basically on a declining trend.

Economists said the yen's rise against the dollar earlier this year was weakening the competitiveness of Japanese products overseas, and that many firms have been forced to raise the export prices of their products to cope with the yen's rise.

A strong yen makes Japanese goods less competitive in overseas markets by inflating their dollar-based prices. It also decreases the value of the companies' earnings abroad when the dollar-based sales are converted into yen.

In April, the dollar had dropped more than 20 percent from the beginning of the year to 79.75 yen. It has since been rising and has come close to achieving 95 yen this week.

Economists said a continuation of sharp rises in imports will also help push down Japan's trade surplus.

In July, imports rose 28.6 percent from a year earlier to $28.59 billion. Exports rose 10.3 percent to $38.03 billion.

However, the economists said a fall in the trade surplus was likely to be moderate as exports may pick up due to the improving U.S. economy and brisk economies in other Asian countries.-Reuter