Energy imports trim Japan surplus

Overseas demand for flat screen TVs fell after the World Cup

Japan's trade surplus with the rest of the world dropped slightly in July, according to official figures.

The surplus fell by 0.2% in July from a year earlier to 860.9bn yen ($7.3bn; £3.9bn) as import growth outpaced that of exports due to higher energy costs.

However, despite the dip, analysts said Japan's economic growth would be sustained by strong domestic demand.

Japan has typically depended on exports to boost growth, but economists fear a slowing US economy could hamper this.

"Exports to Asia are holding up for now, but if the US suffers a serious slowdown, Japanese exports to Asia will slow as well because of the heavy outflow of goods from the region," said Seiji Adachi, senior economist with Deutsche Securities.

Oil costs

Exports climbed 14.2% compared with a year earlier to reach 6.3 trillion yen, boosted by sales of cars and shipments of steel, the government said.

Meanwhile imports were 16.8% higher at 5.4 trillion yen. Japan's oil imports rose by 25% to 942bn yen, but the volume fell by 6% as a result of the higher prices.

"These figures tell you that Japan's growth is now led by domestic demand," said Noriaki Haseyama, an economist with Daiichi-Life Research Institute.

Analysts are predicting that while exports will continue to grow, the rate will slow in the latter part of this year.