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Economy in Brief

Japan's Trade Accounts Benefit from Lower Oil Prices and Rising Exports
by Carol Stone October 25, 2006

A week ago, we wrote here about further deterioration in trade accounts in Europe for August as energy costs continued to raise import values. We called this "Old News", since we knew already that petroleum prices had already started to drop in September. Sure enough, in today's report of Japan's trade for September, some improvement is evident. The trade surplus rose to ¥1.014 trillion from ¥949 billion in September 2005. Imports were still up, rising 16.9% from a year ago to ¥5.818 trillion. But within this total, "mineral fuels" had their smallest year-on-year increase, 18.2%, since July 2004. In this heavy oil importing nation, mineral fuels peaked at a 72.7% yearly surge in February 2006.

News services today highlight strength in exports, especially motor vehicles, as a reason for the better trade surplus, and this is also the case. On the month, transportation equipment rose 19.9%, yielding a third successive month of 20%-plus yearly increases. A good many of the vehicle shipments head for the US, and the surplus with the US increased to ¥913 billion in September from ¥711 billion a year ago.

One other point in Japan's favor is a renewed acceleration of exports to China. After a significant slowdown in early and mid-2005, Japan's shipments there have also seen a sustained period of year-on-year growth around 20%. These gains, while not erasing Japan's trade deficit with China, have kept it range-bound near ¥200 billion monthly for the last five months. These developments with the US and China help emphasize that trade relations can be improved by gains in exports, not only with restraints on imports.

Monthly Averages
Japan, Bil.¥  Sept 2006 Aug 2006 July 2006 Sept 2005
2005 2004 2003
Trade Balance, NSA 1014 196 858 949 726 996 849
Trade Balance, SA 420 661 757 642      
Exports, SA* 6360 6435 6331 5592 5471 5097 4546
  % Change* 3.2 0.2 1.3 14.2 7.3 12.1 4.7
Imports, SA* 5940 5774 5574 4951 4746 4101 3697
  % Change* 0.6 4.3 -6.9 16.8 15.7 10.9 5.1
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