Japan trade surplus logs first rise in 20 months

TOKYO: Japan's trade surplus grew in June for the first time in 20 months as an export slump eased, data showed Thursday, supporting hopes the world's number two economy is crawling towards a recovery.

The surplus jumped roughly five-fold to 508.0 billion yen (5.4 billion dollars), from 104.1 billion yen a year earlier, the finance ministry reported.

Exports exceeded imports for a fifth straight month, giving a vital boost to a country whose heavy dependence on overseas demand left it highly exposed to the global economic downturn.

The year-on-year improvement in the trade balance, the first since October 2007, reflected a smaller decline in exports and a sharp fall in imports.

Exports sank 35.7 percent from a year earlier to 4.6 trillion yen, after a 40.9 percent plunge in May, while imports dived 41.9 percent to 4.1 trillion yen.

Markets had expected a bigger surplus of 593 billion yen, but analysts still saw the data as a positive sign for the recession-hit economy.

"Exports are improving. What had been most worrying were shipments to the United States, but they shrank less than before," said Daiwa Institute of Research economist Hiroshi Watanabe.

US-bound exports were down 37.6 percent from a year earlier, compared with drops of more than 40 percent in April-May and more than 50 percent in January-March.

Watanabe said a credit crunch that had squeezed demand for cars and other products was now easing, supporting overseas demand for Japanese goods.

Exports should keep improving through 2009 but companies still need to shed excess jobs and manufacturing facilities, he added.

Japan posted a trade surplus of 3.9 billion yen with China, the first black ink in four months, while the surplus with the European Union dived 71.6 percent to 90.5 billion yen for a 10th consecutive decline.

Government stimulus spending efforts are gradually helping to boost demand for Japanese goods, but the recovery is patchy, said Hideyuki Araki, an economist at Resona Research Institute, .

"It is mostly large companies that are benefiting from other countries' economic packages and smaller firms are still struggling. Overall production activity is recovering but lacks strength," he said.

For the six months to June, Japan posted a trade surplus of 8.3 billion yen, down 99.7 percent from a year earlier but marking a turnaround from a deficit of 766.3 billion yen in the second half of 2008.

Japan entered recession in the second quarter of 2008 as consumers around the world stopped buying the cars, high-tech goods and other exports that drove the country's recovery from its 1990s recession.

The economy shrank at an annualised pace of 14.2 percent in the first quarter of 2009, the worst performance on record, but recent data have indicated that exports and industrial production have begun to rebound.