U.S. recovery lifts Japan exports

Japan's economy looks to be improving as exports pick up. Story Tools

TOKYO, Japan (Reuters) -- Japan's customs-cleared trade surplus expanded in July as exports grew due to a recovery in U.S. consumer demand and as the impact of the SARS virus receded.

The surplus rose 7.3 percent from a year earlier to 799.2 billion yen ($6.77 billion), Ministry of Finance data showed on Monday.

That was slightly less than forecast by economists in a Reuters poll, which saw a median surplus of 890 billion yen.

Exports were up 5.6 percent from a year earlier, and were up 1.1 percent from a month earlier on a seasonally adjusted basis.

Imports were up 5.3 percent year-on-year and were up 0.6 percent month-on-month.

The surplus with the United States, Japan's largest trading partner, was down 6.2 percent from a year earlier at 570.1 billion yen, but that drop was smaller than a 21.7 percent fall in June.

Most economists said they felt the fall was temporary and saw a rebound ahead.

"We do not expect weakness in U.S. demand to be long-lasting because we are forecasting the U.S. corporate sector -- labour and capital spending -- will gradually recover," said Toshikimi Kaneki, an economist at Sumitomo Trust and Banking Co.

With the impact from the SARS virus receding, exports to Asia as a whole rose 12.7 percent, compared with a 3.8 percent increase in the previous month. Gains in exports had shrunk for four straight months.

Signs of a rebound in overseas economies have raised hopes among policymakers that Japan's export-led recovery will pick up later this year.

That, as well as better corporate profits and a mild rebound in capital spending, has boosted share prices and the yen, especially after gross domestic product growth data showed the economy grew in April-June at the fastest rate in three quarters.

"Exports to the United States should increase over the next few months. The outlook for exports to Asia is slightly less clear ... but overall, I see the trade balance increasing through the rest of the year," said Yoshimasa Maruyama, economist at Mizuho Research Institute.

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