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Thursday, 24 January, 2002, 08:57 GMT
Japan suffers export slump
A stock market board in Tokyo
Demand for imports has soared as exports plunged
Japan's trade surplus, a key indicator of the country's economic health, shrank by more than one-third in 2001 to its lowest level in 18 years.

The news, which represents the 18th consecutive monthly fall in the surplus, underlines the weakness of Japan's key export industries.

Concern over falling Japanese exports recently persuaded the government to move towards a weak-yen policy, which has seen the currency fall to three-year lows against the US dollar.

If the current weak yen persists, as many economists predict, the trade surplus should start to widen again this year.

By the end of last year, the total trade surplus stood at 6,600bn yen (34.5bn; $49bn), with exports down 5.1% to 49,000bn yen and imports up 3.6% to a record high of 42,400bn yen.

Hi-tech woes

The main factor behind Japan's export slump is slowing global demand for its hi-tech exports.

"A slump in the IT industry spread to the world and severely hurt Japanese exports throughout the year," a finance ministry official said.

Among Japanese exports, semiconductor shipments plunged 20% year on year and those of telecoms equipment fell 17%.

The weakest performance was in trade with the US, a major customer of its electronics. Shipments there fell by 7%.

Falling yen hopes

On average, the yen traded at just under 121 to the dollar last year, down 11% from 2000.

In recent weeks, however, the Japanese currency has dropped as low as 134 in the dollar, and many economists predict it could hit 140 in the near future.

The yen stood at 134.4 to the dollar in early trading on Thursday.

It has drifted lower in the past few days, since US Treasury Secretary Paul O'Neill gave out conflicting signals on whether he considered a weak yen acceptable.

Mr O'Neill criticised Japan's failure to carry out more constructive economic reforms, but the markets have interpreted some of his remarks as implying that the US could live with a weak yen.

Import surge

A weakening yen will dampen Japanese demand for imports, which has soared in recent months.

The record high import figure was not indicative of a pick-up in domestic demand, but merely reflected the desire for cheaper products amid a slump.

"We saw an increase in clothes and textile imports, mainly from Asia, as Japanese clothing companies, which were becoming less competitive, bought them at lower costs," said Koichi Ono, economist at Daiwa Research Institute.

See also:

21 Jan 02 | Business
Bankruptcy on the rise in Japan
13 Jan 02 | Business
Japanese builder goes bust
07 Jan 02 | Business
Japan seeks support for bank rescue
28 Dec 01 | Business
Japan prepares bank rescue package
27 Dec 01 | Business
Japan Inc slows as yen hits new lows
24 Dec 01 | Business
Japan approves austere budget
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