Page last updated at 06:03 GMT, Wednesday, 25 June 2008 07:03 UK

US slowdown reduces Japan surplus

A street scene in Tokyo
Analysts expects Japan to leave interest rates unchanged for some time

Japan's trade surplus fell for a third consecutive month in May, down by 7.6% on a year ago, figures have shown.

Surging crude oil prices and the rising cost of other commodities meant its imports bill rose, cutting the surplus to 365.61bn yen ($3.4bn; 1.7bn).

The US slowdown meant demand for Japanese cars and machinery continued to fall, and the trade surplus with the US was down by 11%.

But its surplus with the rest of Asia rose for the second straight month.

Overall imports grew by 4.4% to 6.44 trillion yen in May, while exports rose 3.7% to 6.8 trillion yen, the finance ministry said.

Economy fears

Analysts say Japan, a key exporter, is likely to leave rates unchanged for some time, because of inflationary pressures and the US slowdown.

Japan has the lowest interest rates among the Group of Eight industrialised nations. Its last rate increase was in February 2007, from 0.25% to 0.5%.

Earlier this month, Japan revised its economic growth rate upwards for the first quarter of the year after higher-than-expected capital investment, but economists expect slower growth ahead.

Fears remain about what will happen to the world economy, as food and fuel prices continue to rise.

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