Japan's trade surplus fell from year-ago levels for the first time in more than a year in August as a surge in oil prices pushed up imports and overshadowed sustained growth in exports. Japan's customs-cleared trade surplus fell 26 percent in August from a year earlier to 576.13 billion yen ($5.25 billion), Finance Ministry data showed on Wednesday. The surplus rose 7.6 percent from July on a seasonally adjusted basis. The outcome compared with a consensus forecast for a surplus of 800 billion yen, a rise of 2.8 percent from a year earlier. Discounting the oil price factor, which pushed up imports to the second highest monthly amount on record, economists said the figures boded well for Japan's economy. "The surplus was much smaller than expected. But both exports and imports were up, with imports pushed up by a surge in oil prices," said Mamoru Yamazaki, chief economist at Barclays Capital. "Another factor pushing up imports was machinery, which reflects a pickup in domestic capital spending." Exports were up 10.4 percent from a year earlier and rose 2.3 percent from July on a seasonally adjusted basis. The ninth straight month of year-on-year increase was propelled by a 11.0 percent rise in export volumes.
Increases of about 20 percent in optical equipment and steel led the growth in exports. Automobile exports rose 4.7 percent. Japanese companies have been riding a world-wide surge in demand for DVD players and flat-panel TVs to make up for slowing demand for digital cameras and personal computers. Reflecting a jump in oil prices and firming domestic demand, imports rose 18.4 percent from a year earlier, the sixth straight month of increase. Imports were up 1.0 percent from July. Of the imports, crude oil rose 33.7 percent, oil products 49.7 percent and coal 47.7 percent. Markets were little moved by the data, with the Nikkei stock average <.N225> down just 0.25 percent at 11,053.54 in mid-morning trade. The yen was quoted at 109.77 to the dollar compared with 109.65 in late U.S. trade.
CHINA A CONCERN
A Finance Ministry official told reporters the impact of the oil price rise may not be long-lasting. "Oil prices have come down from their peaks, so the effect of higher costs on the surplus should ease after August," he said. Despite the generally upbeat assessment, economists said signs of a slowdown in demand from Japan's neighbours, notably China, were a concern. "The surplus with Asia was flat (on year-on-year basis), and that was probably a big factor since Asia had been a major force for the gains in Japan's trade surplus," said Shuji Shirota, economist at Dresdner Kleinwort Wasserstein. Strong demand for exports had helped Japan log its best growth in a decade in recent quarters, but worries about slower growth in China and the United States have muddied the outlook. Exports to China were up 13.2 percent in August on a year-on-year basis after a rise of 22 percent in July. Exports to the United States rose 2.3 percent from a year earlier after a rise of 3.4 percent in July. "Growth in China-bound exports is moderating as a result of the tightening policy over there," said Yamazaki at Barclays. But he added that the slowdown in export growth appeared to be an adjustment towards a sustainable rate. Private sector economists have downgraded their forecasts for gross domestic product growth for the fiscal year to next March after growth for the April-June quarter was downgraded to an annualised 1.3 percent from an initial 1.7 percent. A recent survey of 38 private sector economists by the Economic Planning Association produced a consensus forecast of 2.8 percent annualised growth in the July-September quarter compared with the previous quarter. ($1=109.75 yen)///