Japan's November Trade Surplus Rises on Robust Exports

Japan's trade surplus rose more strongly than expected in November from a year earlier as growing exports continued to underpin a steady recovery of the world's second-largest economy.

The trade surplus jumped 54.1% in November from a year earlier to 915.9 billion yen ($7.76 billion) as export growth outpaced import gains, government data showed on Thursday.

A separate survey released by Reuters on Thursday also underscored Japan's corporate-sector strength, showing that companies remain upbeat about business conditions in December and expect further improvement three months ahead.

The rise in the trade surplus compared with economists' consensus forecast for a surplus of 611.3 billion yen, or a year-on-year rise of just 2.8%. It followed a 25.3% fall in October, which came largely as rising raw material costs inflated the nation's import bill.

"The trade surplus was bigger than expected as exports were stronger than we thought. Shipments of automobiles are strong," said Yasuo Yamamoto, senior economist at Mizuho Research Institute.

"The data showed imports of crude oil fell while exports remained firm. As crude oil prices continue to decline, this trend may be here to stay for a while. Japan's trade surplus had been on a declining trend since around 2004 as crude oil prices rose, and recently it has been leveling off. But from now on, a rising trend in the trade surplus will likely continue."

The yen got a slight lift from the data, rising to 118.35 against the dollar dollar from around 118.40 just before the figures landed. On a seasonally adjusted basis, the overall trade surplus rose 39.9% from previous month to 991.1 billion yen, data from the Ministry of Finance
(MOF) showed.

Imports rose 7.5% to 5.72 trillion yen, due largely to higher raw material costs, while exports increased 12.1% to 6.63 trillion yen, helped by shipments of automobiles, steel and electronic parts.

Exports to the U.S. rose 8.6% in November from a year earlier to 1.51 trillion yen, while shipments to China expanded 19.5% to 998.1 billion yen.

Import growth slowed due to lower demand for crude oil and softening oil prices, a MOF official told reporters. Imports of crude oil in value terms were below the year-earlier level for the first time since May 2004. Both exports and imports to China were at record highs in yen terms.

Some economists are not so optimistic on the outlook. "The data was a bit stronger than expected ... Looking forward, however, effects of a decline in the housing sector (in the U.S.) will slow down the economy and will likely dampen Japan's exports in the future," said Azusa
Kato, economist at BNP Paribas.

The Bank of Japan has been closely watching how a U.S. economic slowdown and its impact on the world economy might affect Japanese exports, one of the main engines of the nation's economic recovery.

BOJ Governor Toshihiko Fukui Tuesday reiterated his view that the U.S. economy will likely achieve a soft landing, although he added that the central bank will continue to monitor U.S. economic developments ahead.

While the central bank has expressed caution over recent slack consumer spending and price data, it remains upbeat about corporate activity.

As widely expected by financial markets, the BOJ left unchanged its key overnight call rate target at 0.25% at its policy meeting Tuesday. Many market traders expect the central bank to raise rates early next year, but speculation of a January move receded after Fukui Tuesday expressed caution over weak personal consumption and tame consumer price growth.