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Japan Trade Surplus Resumes Decline

July 12, 2000

TOKYO (AP) _ Japan’s most broadly defined trade surplus shrank 18.2 percent in May, showing its first year-on-year contraction in four months as the world’s second-largest economy imported more and paid higher prices for oil.

The nation’s current account surplus _ a measure of flows of merchandise, services, tourism and investment income _ fell to $7.85 billion (840.2 billion yen) from $9.59 billion in the same month last year, the Ministry of Finance said Wednesday.

The politically sensitive surplus, measured before adjustment for seasonal factors, shrank slightly less than the 21 percent contraction projected by economists surveyed by Dow Jones Newswires.

The fall came amid signs that the Japanese economy is moving closer to a recovery, economists said.

Pumped up by record injections of public spending by the government, stronger domestic demand translated into more imports.

Imports jumped 20.5 percent in May, outpacing an 8.1 percent increase in exports.

That contributed to a 36 percent decline in Japan’s trade and services surplus, which fell to $2.97 billion.

Import figures were also inflated by rising oil prices. Crude oil averaged $25.12 per barrel in May, up 61.8 percent from the same month a year earlier.

Though it showed year-on-year increases between February and April, Japan’s current account surplus fell 12 straight months before that.

A rising yen _ which reduces the cost of imports _ has also been a significant part of that trend.

The dollar bought an average of 108.11 yen during May, compared to 122.11 yen a year earlier.

The current account is calculated by determining the difference between Japan’s income from foreign sources against payments on foreign obligations. It excludes net capital investment.

May’s figures were ``fairly in line with expectations,″ said Vincent Musumeci, an economist at ABN Amro.

He warned, however, that the current account surplus could start growing gain by the end of the year ``on strong export demand from Asia and possibility of lower crude oil prices.″

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