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Thursday, 12 December, 2002, 06:54 GMT
China to be top exporter to Japan
Chinese men in a car lot
Machinery exports to Japan are booming
For more than half a century the US has exported more to Japan than any other country.

But the long relationship, forged as a result of the postwar US occupation and subsequent security pact between the two countries, is under threat from China, new figures show.

The latest data indicates that rising machinery exports - partly from Japanese firms using cheaper Chinese labour - will help knock the US from its top spot.

And the shift is now sparking hostility in Japan, as some say China's intentionally weak currency is hurting not only Japan's competitiveness, but that of other countries too.

The trend "is likely to become a political issue," said Koji Hiiragi, an economist at UFJ Institute, "and prompt Japanese lawmakers to step up calls for a higher yuan".

Sure enough, the politicians are already there.

"China might also benefit if it makes the yuan's value higher," Finance Minister Masajuro Shiokawa told a parliamentary committee earlier this month.

China was contributing to world deflation by bringing prices down, which would harm its own export markets in the long run, he indicated.

Clients and allies

Whatever the difficulties of the past deflationary decade, the US-Japan trading relationship has been the bedrock of Tokyo's economic miracle.

Japan's journey from near-flattened and practically broke client state after World War II to its confident worldbeater status by the 1980s was fed by access to US markets.

Despite Japan's huge trade surplus with the US, the relationship was two way.

End of an era?

But the finance ministry's figures, covering the ten months to October, indicate an end to that tradition.

Not only is Japan's overall trade surplus shrivelling, but the 6.31 trillion yen in Chinese goods sold in Japan - up 9% on the previous year - has overtaken the 6.04 trillion yen in products from the US.

Machinery exports, including computers, TVs and videos, outstripped agricultural products for the first time, thanks in part to Japanese firms' moving their manufacturing to China.

Japan's own trade with China has skyrocketed too, going some way towards filling the gap left by the lacklustre US economy.

But China still sends more to Japan than vice versa, a trend more and more people are blaming on the weak yuan.

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 ON THIS STORY
Osamu Watanabe, Japan External Trade Organization
"Recently in China, especially in the area of the sea, the economy has developed dramatically"
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