Japan's Trade Surplus Shrinks for a 2nd Month

From Times Wire Services

Japan's giant trade surplus shrank in August for the second straight month and, seeing the unexpected drop, officials forecast that the much-welcome declining trend is likely to continue.

The Finance Ministry announced Monday that the nation's customs-cleared trade surplus fell in August to $5.97 billion from a revised $6.05 billion the same month last year, and from the July figure of $9.43 billion.

Exports rose 12.6% to $35.22 billion, and imports grew 15.9% to $29.26 billion.

Tokyo's politically sensitive trade surplus with the United States fell to $2.94 billion from $3.48 billion a year earlier, dropping for the third month in a row.

The figures were well below the expectations of private economists, who had predicted that the surplus would rise to between $6.1 billion and $8 billion.

Economists had expected the surplus to increase because crude oil imports had been sluggish, there was a rebound in car exports, and there were lingering effects from a strong yen.

The surplus shrunk sharply in July as the strong yen started to take its toll on exports, going to $9.43 billion from $12.43 a year earlier. A higher yen slows Japanese exports, because the strong currency raises the prices of Japanese goods in terms of foreign currencies, making those goods less competitive.

The August trade figures actually showed stronger growth in imports than in exports.

"The export figure was low, lower than expected, perhaps on lower demand in the United States. But it is hard to see if this is the start of a trend without seeing what happens next month," said Hidetoshi Tsuchiya of Sanwa Research Institute.

In another report, Japan's economic growth accelerated to an annual rate of 3.1% in the second quarter, the Economic Planning Agency reported, qualifying the gain as distorted.

Despite the clear improvement over several quarters of near-zero growth or of contraction, the government forecasting body said the expansion looks large because of low first-quarter production after the Kobe earthquake in January.

Earlier this month, the agency abandoned its insistence--long considered unrealistic by private economists--that the economy was recovering after four years of sluggishness.

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