Japan's trade surplus off, export growth seen waning

Japan's trade surplus shrank in June from a year earlier as high costs of oil products outweighed gains in exports, which are seen slowing, although robust domestic demand is expected to keep the economic recovery intact. The surplus fell 5.9 percent from a year earlier to 807.9 billion yen ($6.9 billion), government data showed on Wednesday.
The decline followed the first year-on-year rise in the trade surplus in 17 months last month. The figure compared with analysts' median forecast of a surplus of 831.3 billion yen. Exports were up 14.4 percent from a year earlier to 6.2696 trillion yen while imports rose 18.2 percent to 5.4618 trillion yen.
Export growth is seen slowing mainly due to an expected slowdown in the US economy. Exports to the United States grew 7.6 percent from a year earlier to 1.3595 trillion yen, down sharply from double-digit growth seen since last November.
"I think we are probably seeing tentative signs of a slowdown in exports," said Kiichi Murashima, director of economic and market analysis at Nikko Citigroup.
"I don't expect a positive contribution from net exports to GDP going forward," he said, but added that import growth was strong due to domestic demand.
Exports to China expanded 25.6 percent to 920.7 billion yen. On a seasonally adjusted basis, the overall trade surplus fell 26.2 percent from previous month to 612.5 billion yen, data from the Ministry of Finance showed.
For January-June 2006, Japan's trade surplus was down 24.0 percent from the same period a year ago at 3.4 trillion yen. Exports were up 16.1 percent at a record 35.8 trillion yen. A steady recovery and rises in consumer prices prompted the Bank of Japan earlier this month to raise interest rates for the first time in six years.
Markets are now expected to shift their focus to consumer price data on Friday. A stronger-than-expected reading could re-ignite speculation of another rate rise by the end of the year. But a bigger-than-expected slowdown in the US economy would put a damper on Japan's economic growth, which could prevent the BOJ from raising rates later in the year. Japan's economy grew a real annualised 3.1 percent in January-March from the previous quarter, the fifth straight quarter of gains.