Japan's trade surplus widened in May to $6.98 billion, the first year-on-year rise in three months, as the surging yen swelled the dollar value of the country's exports, the Ministry of Finance said Thursday.
The ministry said the unadjusted overall trade surplus grew to $6.98 billion in May from $6.52 billion a year earlier. The politically sensitive trade surplus with the United States widened to an unadjusted $3.30 billion from $3.04 billion a year earlier.
But the ministry said the surplus is still actually on a downward course. "Import volumes have been rising sharply for the past two years, and Japan's trade surplus remains on a declining trend," a senior finance ministry official said.
Analysts said the rise in the May surplus was mainly due to the "J-curve effect," in which the strong yen temporarily inflates the value of exports in dollar terms.
"The J-curve effect is expected to continue for the foreseeable future," said Kyohei Morita, economist at Nomura Research Institute. "Therefore, the [dollar-based] trade gap is unlikely to narrow significantly."
In the J-curve, the appreciation of the yen pumps up the dollar value of exports, initially boosting the surplus. But the stronger yen, which makes Japanese exports less competitive, should in theory eventually dampen export volume and help boost imports.
The yen has surged about 17% against the dollar since January.
The latest trade surplus is generally within market expectations.
"The May figures were within our forecast. The surplus grew but the recent downward trend was not dampened," said Hiroyuki Kinoshita, research officer at DKB Research Institute Corp.
"But the pace of the trend is expected to be slow as long as the current bullishness of the yen continues," he said.
On a yen basis, the trade surplus fell 12.3% in May, declining for the sixth consecutive month.
The United States, frustrated with Tokyo's slow progress in cutting its surplus, announced last month that it would slap punitive tariffs on Japanese luxury cars if Japan fails to open its market to U.S. autos and auto parts by the end of June. The tariff would be retroactive to May 20.
The overall volume of Japanese motor vehicle exports rose 3.7% in May from a year earlier, but the number of luxury cars fell 21.7%, a finance ministry official said.