JAPAN'S TRADE SURPLUS PLUNGES

       Exports fell 37 per cent in July, but imports were 41 per cent lower
       Japan's current-account surplus shrank at a faster than expected pace in July, hit by weak exports and falling returns from overseas investments, official data showed yesterday.
       The surplus in the current account, the broadest measure of trade with the rest of the world, fell 19.4 per cent in July from a year earlier to 1.27 trillion yen (Bt468.9 billion), the finance ministry said.
       The decline followed the first year-on-year rise in the surplus in 16 months in June as the world's number two economy slowly emerges from its worst recession in decades, helped by stimulus spending by world governments.
       The July suplus in the income account fell 24.2 per cent to 1.25 trillion Yen, reflecting lower returns on overseas investments held by Japanese companies and individuals, partly because of super-low global interest rates.
       The services-account defficit also widened due to lower patent payments from overseas, offsetting the positive impact of a 42.3-per-cent increase in the trade surplus from a year earlier to 437.3 billion Yen.
       Exports dropped 37.6 per cent from a year earlier to 4.11 trillion Yen, mainly because of lower energy import costs.
       "The trade-account surplus is expected to remain on an improving trend," JP Morgan economist Miwako Nakamura said in a report.
       But the income-account surplus "will probably stay relatively low on the back of low interest rates and weak corporate profit margins in the world".
       One risk factor for exports is the strength of the yen, which is making Japanese goods less competitive on global markets, analysts say.
       There are also worries that a budding recovery in major overseas economies could lose stream later in the year as the effects of pump-priming measures by world governments fade.
       "We believe economic data for July-September will still show the positive effects of stimulus measures," said Hideki Matsumura, senior economist at the Japan Research Institute.
       "The concern is about the October-December data, which are likely to reflect economic findamentals," he said.
       Historically, Japan has run a large surplus in its current account, which measures the flow of goods, services and investment income.
       But its heavy dependence on foreign demand to drive its economy left it highly vulnerable to the global economic slowdown, which crushed demand for its key exports such as cars, hi-tech goods and machinery.
       Japan's economy returned to positive growth in the April-June quarter after a year-long recession as exports and factory output rebounded.
       Japanese corporate bankruptcies fell for the first time in three months in August as companies found it easier to borrow and government spending fuelled demand.
       Business failures declined 1 per cent from a year earlier to 1,241 cases, Tokyo Shoko Research said in Tokyo yesterday.
       Efforts by the Bank of Japan and the government to encourage lending helped businesses stay afloat in the wake of the country's deepest postwar recession.
       "For now, it appears that we are past the worst with the emergency programmes," said Hiroshi Miyazaki, chief economist in Tokyo at Shinkin Asset Management.
       "Production has been recovering with the stimulus, especially at industries that qualify for Japan's eco-point incentives," he said

       AT A GLANCE
       The surplus in the current account, the broadest measure of trade with the rest of the world, fell 19.4 per cent in July from a year earlier to 1.27 trillion yen (Bt468.9 billion), the finance ministry said.
       One risk factor for exports is the strength of the yen, which is making Japanese goods less competitive on global markets, analysts say.
       Historically, Japan has run a large surplus in its current account, which measures the flow of goods, services and investment income.
       Japanese corporate bankruptcies fell for the first time in three months in August as companies found it easier to borrow and government spending fuelled demand.
       "For now, it appears that we are past the worst with the emergency programmes," said Hiroshi Miyazaki, chief economist in Tokyo at Shinkin Asset Management.