China Is Now Japan's Largest Trade Partner, Replacing The U.S.

Change in trade partners establishes China's place in the global economy and highlights economic interdependence between Japan and China.

TOKYO, April 25 (Kyodo) - China became Japan's largest trade partner in fiscal 2006 for the first time ever on an annual basis, replacing the United States, the Finance Ministry said Wednesday.

The development, shown in the ministry's monthly trade report, symbolizes China's growing clout in the global economy and further deepening economic interdependence between Japan and China.

In fiscal 2006, Japan's trade with China totaled 25,427.6 billion yen compared with the U.S. at 25,160.8 billion yen, according to the ministry's preliminary report.

Japan's exports to China soared 21.2 percent to a record 11,314.5 billion yen in the fiscal year, while imports from the country increased 13.0 percent to a record 14,113.1 billion yen, the ministry said.

''Given recent growth in Japan's exports to China and imports from China, this trend will continue,'' a ministry official said.

Including Hong Kong, China has been Japan's largest trade partner since fiscal 2004.

Private-sector economists also said China will likely stay as Japan's biggest trade partner, though Japan's exports to the United States is also expected to gain momentum in the second half of the year.

''I anticipate China to remain Japan's No. 1 trade partner for the time being as exports to the country are likely to keep growing ahead of the 2008 summer Olympic Games in Beijing,'' said Maiko Moguchi, senior economist at Daiwa Securities SMBC Co.

Noguchi also said Japan's two-way trade with the U.S. is also expected to continue to expand spurred by auto exports, particularly after the U.S. economy picks up in the latter half of 2007.

In fiscal 2006, Japan's customs-cleared trade surplus widened 16.4 percent from the previous year to 9,054.0 billion yen following a 31.4 percent fall in fiscal 2005, the ministry said.

Exports grew 13.4 percent to a record 77,460.9 billion yen and imports gained 13 percent to 68,406.9 billion yen, another record-high figure, according to the ministry.

Japan's trade surplus with the U.S. rose 13.5 percent to 9,096.0 billion yen in fiscal 2006, the second-largest ever level. The largest surplus, 9,665.8 billion yen, was logged in fiscal 1985.

But the ministry official brushed aside concern that the nation's huge trade surplus could become a fresh source of friction between Tokyo and Washington.

''The United States' trade deficit with Japan is the third largest after that with China and the European Union, while Japan's surplus (with the United States) was the largest in fiscal 1985,'' he said.

''So, we assume that our trade surplus would not be so outstanding and would not have much repercussions,'' the official added.



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