Japan's trade surplus drops more than expected

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TOKYO, Aug 22 (AFP): Japan's trade surplus shrank by a bigger than expected 21.1 per cent in July from a year earlier, hit by higher oil import costs and sluggish exports to the United States, the government said today.
Analysts said a stronger yen is likely to keep the surplus under pressure in the coming months, while housing market problems in the United States could also put the brakes on exports.
Japan's trade surplus dropped to 671.22 billion yen (5.9 billion dollars) last month, the first year-on-year decline in nine months and well below the market forecast of 764 billion yen, the finance ministry said.
Exports from the world's second-largest economy rose 11.7 per cent by value to 7.06 trillion yen while imports gained 16.9 per cent to a record 6.39 trillion yen.
Exports of automobiles increased 12.8 per cent to 1.17 trillion yen although motor vehicle shipments to the US market declined 1.3 per cent. Exports of steel products jumped 19.7 per cent to 349.5 billion yen.
A major earthquake northwest of Tokyo last month that crippled a key supplier of auto parts weighed on automobile exports, officials said.
Japanese automakers have also been shifting production to the United States to reduce exports and try to prevent any 1980s- style protectionist backlash. US auto sales have also seen a recent drop blamed on higher petrol prices and problems in the housing market making consumers cautious.
Imports of crude oil gained 14.9 per cent to 1.08 trillion yen, with imports of nonferrous metal up 59.6 per cent at 215.8 billion yen.
Japan's trade surplus looks likely to fall again in August and September following a recent surge in the yen against the dollar, which weakens the competitiveness of Japanese goods overseas, analysts said.
"The impact of the yen's appreciation on Japanese exports will come out in August and September and will likely put the brake on export gains," said Keiji Kanda, an economist at Daiwa Institute of Research. The yen soared to a 14-month high of 111.60 against the dollar last week amid turmoil on global financial markets sparked by the US mortgage woes.