Japan trade surplus shrinks


The second largest economy in the world is struggling

TOKYO, Japan -- Japan's trade surplus slid by 38 percent in 2001, its biggest drop since 1970 and a third straight year of decline, as export markets dried up.

Consumer spending also plunged over the Christmas period in the world's second largest economy.

Supermarket chain stores reported on Thursday that sales fell 5 percent last month compared with the previous December, the 37th consecutive monthly decline.

But economists say that despite these grim figures, they expect a turnaround this year as the U.S. economy starts to recover from the September attacks.

Exports skid

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Japan's surplus stood at 6.61 trillion yen ($49.13 billion) in 2001, data from the Ministry of Finance showed.

Japan's surplus with the United States -- its largest trading partner -- fell for the first time in five years, down 6.8 percent at 7.06 trillion yen ($52.46 billion), the ministry said.

Exports in 2001 were hit by the global economic slowdown, which began with a slump in the technology sector and was exacerbated by the September 11 attacks in the United States.

But a widely expected U.S. economic recovery later this year and the yen's sharp depreciation in recent months should help exports pick up again, economists told Reuters news agency.

"What's going to happen this year is likely to be the opposite of last year. That is, exports are going to pick up while imports fall, thereby slowing the pace of surplus declines," Junichi Makino, senior economist at Daiwa Institute of Research, told Reuters.

Stock adjustments in the U.S. were nearly over and capital spending, especially on information technology, was likely to bottom out around the middle of the year, he said.

Asia trade down too

The trade surplus posted its largest drop since 1982 with Asia, down 58 percent at 1.76 trillion yen ($13.09 billion).

The year-on-year decline in the trade surplus slowed to 18.4 percent in December, when it stood at 667.2 billion yen.

In the middle of 2001, the surplus was as much as 87 percent smaller than in corresponding months of 2000. Japan's stark economic news was reflected in the performance of its currency, which remained weak on Thursday.

A rise in exports helped by the weak yen would be good news for Japan's downtrodden manufacturers but a source of concern for neighboring countries, who have grown increasingly agitated over the yen's steady fall since September.

Many Asian governments are concerned about perceptions in financial markets that Japanese officials have been effectively talking down the yen by saying foreign exchange rates should reflect economic fundamentals.

Prime Minister Junichiro Koizumi and Finance Minister Masajuro Shiokawa both say they are watching the yen's movements closely, but they are keeping silent on whether it's falling too much or too fast.

Shiokawa has so far denied any intervention in the markets to weaken the currency.

The yen traded Thursday around levels not seen in more than 39 months, with one dollar buying 134.24 yen.

Reuters contributed to this report.