Japan surplus down as US weakens

Japan saw exports boosted by Chinese demand

Japan's trade surplus shrank by more than expected in July, due to weaker US demand and an increase in oil imports.

The surplus fell to 91.15bn yen ($830.5m; £444.2m), down 86.6% from the same period a year earlier.

China became Japan's biggest export destination, overtaking the US for the first time since World War II, on the back of demand linked to the Olympics.

But there are fears that Japan, which earlier this week kept interest rates on hold, could fall into recession.

Oil prices

Demand from developing countries such as Russia and the Middle East helped to increase exports.

But JP Morgan analyst Masamichi Adachi said the outlook for the Japanese economy "essentially hinges on a recovery in the US economy".

Exports rose 8.1% to 7.63 trillion yen while imports were 18.2% higher at 7.54 trillion yen.

"Imports are surging in value, which shows that high crude oil prices continue to hurt companies revenues and are leading to an outflow of income from Japan," said Yoshiki Shinke, economist at Dai-Ichi Life Research Institute.

Oil prices are up sharply on a year ago, and hit a record above $147 a barrel in July - although prices have fallen in recent weeks.