Collapse in Japanese trade surplus sparks fear of another recession

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The Independent Online

Japan's trade surplus dived 86.1 per cent in May from a year earlier, as a slowing global economy chipped away at Japanese exports and cheap imports from Asia soared.

Japan's trade surplus dived 86.1 per cent in May from a year earlier, as a slowing global economy chipped away at Japanese exports and cheap imports from Asia soared.

The customs-cleared trade surplus was 80.1bn yen, down from ¥575bn (£3.3bn) in May last year, a Finance Ministry official said yesterday. Excluding a trade deficit in January, it was the lowest since January 1996.

Takehiro Sato, an economist for Morgan Stanley, said the decline in exports ­ rather than a recovery from April's sharp drop ­ was "serious" reversal that boded ill for growth in the overall economy.

Japan's once-mighty trade surplus has been declining in recent years. The trade balance swung into a deficit in January for the first time in four years. Recent data suggested that the world's second-biggest economy was sinking into its fourth recession in a decade.

But the Economics Minister Heizo Takenaka said yesterday that Japan's economy was not likely to contract this fiscal year and next and in fact should grow at 2 to 3 per cent in the middle to long term. The government expects that to result in the economy growing by about 1.7 per cent in fiscal 2001/02. But many policy-makers and economists have said that will be hard to reach.

The Bank of Japan downgraded its economic assessment on Monday, citing falling exports as prompting a large decline in output. The sharp decline in Japan's trade surplus pushed the dollar slightly above 123 yen after the data's release. It was bid 122.23 yen to the dollar late in the afternoon.

Economists said the declining trend in the trade surplus would continue because slowdowns in major trading partners, especially the US, are taking a toll on exports. Also, price-competitive imports from Asia are continuing to rise.

Japan's surplus with the US fell 15.9 per cent year on year to ¥390.6bn. Its surplus with the European Union was down 32.3 per cent at ¥151.6bn.

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