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Japan trade surplus rises for second month

TOKYO, Aug 26 – Japan\’s trade surplus soared for a second straight month as the world\’s second largest economy limps out of its worst recession in decades, official data showed on Wednesday.

Exports exceeded imports for a sixth straight month, aiding a tentative economic recovery from a severe slump triggered by a collapse in overseas demand for Japanese cars, electronics and other goods.

The trade surplus jumped more than four-fold to 380.2 billion yen (4.0 billion dollars) in July, from 81.9 billion yen a year earlier, the finance ministry reported.

The figure was slightly smaller than the 390 billion yen surplus the market had expected.

Exports fell 36.5 percent year-on-year to 4.84 trillion yen, hit by decreased shipments of automobiles and steel. Imports sank 40.8 percent to 4.46 trillion yen due to lower oil prices and other energy costs.

The fall in exports by value was sharper than the drop of 35.7 percent in June, but that was because Japanese product prices have fallen as energy costs decline, said Daiwa Institute of Research economist Hiroshi Watanabe.

"Export volumes are recovering due to demand from China and other Asian countries," he said.

Export volumes fell 27.6 percent in July from a year earlier, compared with drops of more than 40 percent in February and March, the data showed.

China\’s economic stimulus spending and an improvement in the US economy helped to lift demand for Japanese goods, Watanabe said.

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A recovery in the United States — the main consumer of high-end Japanese products — is also boosting Japan\’s exports to China, whose factories use many parts exported from its neighbour, Watanabe said.

"Exports will likely improve, at least in terms of volume, until the end of the year on the back of the steady US economy, while imports will keep falling" due to lower energy prices and weak demand in Japan, he said.

"I believe the trade surplus will improve in the coming months."

Japan entered recession in the second quarter of 2008 as its heavy dependence on overseas demand to drive growth left it highly exposed to the global downturn.

But data released last week showed the economy expanded by 0.9 percent in the three months to June from the previous quarter, returning to positive growth after the worst recession since World War II.

"The recovery trend in exports remains unchanged," said Naoki Murakami, chief economist at Monex Securities.

"We can expect the recovery in production and exports of manufacturing companies will continue" in the coming months, he wrote in a research note.

Japan\’s trade surplus with the United States shrank by 44.5 percent in July from a year earlier to 333.0 billion yen while that with the European Union fell 72.1 percent to 104.0 billion yen, the finance ministry said.

The trade deficit with China narrowed by 27.2 percent to 54.0 billion yen.

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