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Wednesday, 20 June, 2001, 05:51 GMT 06:51 UK
Japan's trade surplus slumps
Close up of computer chip
Demand for semiconductors has fallen
Japan's trade surplus, once the envy of industrialised nations, has slumped by 86% from a year earlier, an official report has revealed.

The country exported 80.1bn yen more goods than it imported last month, Japan's Finance Ministry said, reporting the 11th successive decline, year-on-year, in the country's trade balance.

The slump was attributed to falling foreign demand for electrical machinery and semiconductors, two of the sectors which powered Japan's development in the second half of the 20th century into a major industrial power.

And the data will heighten concerns that Japan, which has struggled for a decade to shrug off economic stagnation, is poised to re-enter recession.

Economic performance, or gross domestic product (GDP), figures released last showed that Japan's economy shrank by 0.2% in the first three months of the year.

Recession is technically defined as two successive quarters of economic contraction.

Japan's economics minister Heizo Takenaka is expected later this week to present an official outlook predicting near zero growth this year, compared with current official forecasts of 1.7%.

Long-term trend

Monday's report revealed that the level of imports to Japan jumped 14% in the first quarter, while exports fell 0.9%, continuing a long-running trend.

But while economists have blamed much of the long-term decline on the weakness of the domestic economy, the growing willingness of Japanese firms to shift production abroad to cut costs is also seen as key.

The level of the decline in the trade surplus is likely to accelerate efforts by the US to help Japan return to growth, and help the world economy pull out of a slowdown.

Washington and Tokyo are to hold talks later this year on bad loans held by Japanese banks, telecoms deregulation, competition policies and direct investment.

The talks would represent a sea change in the attitudes of US politicians, who a decade ago held concerns over the relative strength of Japan's exporters.

"It is certain that US interest in trying to contain Japan's strong economy up until the early 1990s is now shifting to how to help a weak Japan," Japan's Asahi newspaper said.

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