Japan posts trade surplus as export slump eases

Japan announced Wednesday an unexpected trade surplus as its export slump continued to ease, adding to hopes the world's number two economy is through the worst of its deepest post-war recession.

The trade surplus of 68.95 billion yen (728 million dollars) for April was down 85 percent year on year, according to government data, but markets had expected a deficit of about 69.5 billion yen.

It was Japan's third straight monthly surplus, following a record deficit in January when the global economic downturn had triggered a collapse in worldwide demand for the country's cars, electronics and other goods.

"Japanese exports appear to have bottomed in February, led by exports to Asia," said Kyohei Morita, chief Japan economist at Barclays Capital.

"We believe exports will continue to follow a moderate recovery trend, led by exports to Asia, especially China," he added.

Exports were down 39.1 percent in April from a year earlier, marking an improvement compared with a year-on-year drop of 45.5 percent in March and a record fall of 49.4 percent in February.

Exports posted a second straight increase month-on-month, noted Naoki Murakami, chief economist at Monex Securities.

"But the pace of the recovery in exports is not very strong," he said.

Japan announced last week that its economy suffered its sharpest contraction on record in the three months to March, shrinking 4.0 percent compared with the previous quarter.

The economy will probably avoid a contraction in the current quarter thanks to government stimulus spending and a recovery in exports, said Masamichi Adachi, an economist at JPMorgan Securities.

"But that doesn't mean we'll have sustainable growth through the next few years because the fiscal stimulus will fade away next year.

"In the short-term, we are rather optimistic. But after that there are many challenges facing the Japanese economy," he said.

In an effort to ease the recession, the government has announced a series of economic stimulus packages, including a 15.4-trillion-yen injection unveiled last month.

The government on Monday upgraded its assessment of Asia's biggest economy for the first time in more than three years, saying that while the situation was still tough "the tempo of worsening has become moderate."

Japan's factory production rose for the first time in six months in March and data due out on Friday is expected to show the first back-to-back increases in output in more than a year in April.

Japan entered recession in the second quarter of 2008 as its heavy reliance on overseas markets as an engine of economic growth left it highly vulnerable to the fallout from the global economic crisis.

Bank of Japan governor Masaaki Shirakawa said Monday that the economy may return to positive growth in the quarter to June, predicting a "mild recovery".

It would be the first time in five quarters that the economy has expanded, marking an end to its worst recession since World War II.