Japan July trade surplus 671 bln yen, -21pct y/y

Aug 23, 2007 - Japan's trade surplus fell for the first time in nine months in July, prompting concerns about the outlook for the country's exports amid worries over a slowdown in the U.S. economy due to rising U.S. mortgage defaults.

But the data did little to alter market views that the Bank of Japan (BOJ) will keep interest rates on hold at a two-day policy meeting starting on Wednesday in view of a global credit squeeze that has sparked financial market turmoil.

Exports rose 11.7 percent from a year earlier to 7.0627 trillion yen ($61.40 billion), below economists' median forecast for a 13.0 percent rise, led by shipments of automobiles and steel products, customs-cleared data from the Ministry of Finance showed on Wednesday.

Japan's overall imports, on the other hand, rose 16.9 percent to 6.3915 trillion yen, against the market consensus for a 15.6 percent increase, due to rising crude oil and raw materials prices as well as the yen's weakness.

As a result, Japan's trade surplus fell 21.1 percent in July from a year earlier to 671.2 billion yen, against economists' median forecast for a surplus of 764.9 billion yen, or a year-on-year fall of 10.1 percent.

Exports to the United States, Japan's largest export destination, rose 1.3 percent from a year earlier to 1.4420 trillion yen, mainly on an increase in shipments of organic compounds.

U.S.-bound exports had fallen in April for the first time in more than two-years but showed signs of recovery in the following months, while solid demand for Japanese goods in Asia and Europe has cushioned a slowdown in U.S. bound shipments.

Exports to Asia climbed 13.8 percent from a year earlier to 3.4236 trillion yen, rising for the 65th month in a row, and those to China increased 20.6 percent to 1.1018 trillion yen, led by shipments of electronic parts.

EU-bound exports rose 13.1 percent to 991.1 billion yen, up for the 21st straight month, led by shipments of automobiles.

On a seasonally adjusted basis, the overall customs-cleared trade surplus increased 0.1 percent from the previous month to 822.6 billion yen, the data showed.

Exports have been a key driver of growth in the world's second-largest economy, which is enjoying its longest growth cycle of the postwar period, albeit at a slower pace than in previous booms, on the back of robust corporate spending.

Japan's economic growth slowed to an annualised rate of 0.5 percent in April-June from 3.2 percent logged in the previous quarter, due in part to sluggish export gains.

The BOJ has left monetary policy unchanged since raising the key policy rate to a decade-high 0.50 percent from 0.25 percent in February, which was the first rate hike since July last year.