Japan trade surplus shrinks as exports dip

Tokyo, March 23 | Updated: Mar 24 2005, 05:30am hrs
Japan's trade surplus shrank in February from a year earlier for the second month in a row as exports to crucial markets such as China weakened, casting doubts over whether the economy was safely out of recession.

The surplus fell 21.7% from the same month a year earlier to 1.093 trillion yen ($10.36 billion), government data showed on Wednesday, lower than a median market forecast of 1.35 trillion yen, or a 3.3% fall.

Mu ch of the decline, which followed a year-on-year slide of around 60% in January, was due to a surge in oil prices that pushed up the overall value of imports, but economists said the tepid growth in exports was the main concern.

What's worrying is that exports, on a volume basis, are down from year-ago levels, notably those bound for Asia, said Seiji Adachi, senior economist at Deutsche Securities.

In value terms, exports rose 1.7% year-on-year in February, led by automobile exports and steel exports, but dramatically less than the double-digit gains seen last year. Month-on-month, exports fell 5.0% on a seasonally adjusted basis while the surplus rose 7.7%. In volume terms, exports fell 4.2% year-on-year, led by a 6.7% drop to Europe and a 3.6% fall to Asia.

Most worrying of all was a year-on-year fall in exports to China by 2.2%, the first fall since December 2001, although some economists said this may have been affected by the Lunar New Year falling in February. Exports to the US rose 6.4%. Over the last few years, Japan has benefited from exports of capital goods and production goods to China and other Asian neighbours, Adachi said.