Cars drive Japan's trade surplus

Cars remains a crucial export for Japan

Japan saw its trade surplus rise in June driven by strong sales of cars to Asia, the US and Europe, figures from the Ministry of Finance show.

Stronger-than-expected export growth helped the surplus to hit 1.23 trillion yen ($10.18bn; £4.9bn), marking a 53% rise year-on-year.

The strong export performance also added to Japan's surplus with the US, which has fallen in recent months.

The data added to expectations that Japan's interest rates will rise soon.

With signs that Japan's economic recovery is well under way, Japan - which raised rates to 0.5% in February - is now tipped to raise them to 0.75% as early as August.

US impact

Exports to the US - the largest single buyer of Japanese goods - were 6.7% higher than in the same period a year earlier.

One main reason behind the rise has been the fall in the yen's value, which makes Japanese products more attractive to overseas buyers.

Keiji Kanda, an economist at the Daiwa Institute of Research, said the yen's depreciation "contributed considerably" to the surplus.

He added that the surplus with the US was forecast to rise steadily for the latter half of 2007, but warned that "prospects for the surplus are uncertain for next year as the possibility is high that the US economy will slow down".