Japan's trade surplus rose in July from year-ago levels for the 13th straight month and, even though exports were down slightly from June, economists said demand in the main markets of China and the United States was holding up for now. Japan's customs-cleared trade surplus rose 44.2 percent in July from a year earlier to 1.1378 trillion yen ($10.33 billion), Finance Ministry figures showed on Thursday. That was higher than the median forecast of 882.4 billion yen in a recent poll. "Although there have been some concerns about a negative impact on exports due to a slowdown in the U.S. and Chinese economies, the data showed that external demand continues to support the Japanese economy," said Mamoru Yamazaki, chief economist at Barclays Capital.
Exports rose 14.3 percent from a year earlier, helped by sales of cars, steel, digital cameras and flat panel TVs. But compared with a month earlier, exports were down 0.3 percent, marking the second consecutive month of decline. Imports rose 8.2 percent year-on-year as crude oil imports rose 22.5 percent, but were down 1.2 percent from June. "Slowdowns in the United States and China have yet to pose a big threat to exports," said Morgan Stanley economist Osamu Tanaka, although he added that exports could slow towards the end of the year.
STRONG ASIAN DEMAND
Exports to Asia were up 21.2 percent in July from the same month a year earlier at 2.6305 trillion yen, the highest on record. Exports to China were up 22.0 percent year-on-year, although strong imports kept the balance in a deficit of 125.546 billion yen, which was down 22.2 percent from a year earlier. The data alleviated concerns about possible fallout from Beijing's measures to cool the Chinese economy and economists said it highlighted the trend of Japanese firms shifting production to China. Many say Japan's trade with China may exceed that with the United States for the first time this calendar year. Japan imports more from China than anywhere else, and China is Japan's second-largest export market after the United States. Previous data showed that exports and imports to China and Hong Kong totalled 10.4 trillion yen for the first six months of 2004, exceeding the 10.0 trillion yen for the United States. The surplus with the United States rose 12.6 percent in July from a year earlier to 639.529 billion yen. Naoki Murakami, senior economist at Goldman Sachs, also focused on growing exports to Asia. "Exports from Japan to the United States are increasingly going through Asia, so the figures don't necessarily reflect U.S. trends any more. Exports to China are still surging year-on-year and Asian demand is providing support," Murakami said. "At this rate, the external contribution to GDP in July-September should again be a positive figure." Gross domestic prodcut (GDP) in real, price-adjusted terms grew 0.4 percent in April-June from the previous quarter. Of that, net external demand accounted for some 0.3 percentage point. The government has forecast 3.5 percent GDP growth for the year ending next March. ($1=110.10 Yen)///