Japanese trade depends strongly on demand in Asia

The value of Japan's exports exceeded that of its imports by 576.1 billion yen ($5.25bn) last month, a 26% fall compared to August 2003.

The figure was far smaller than predicted by market analysts, who had expected a modest rise.

But officials in Tokyo expressed confidence that the country's export-led recovery would continue.

Oil price rises and strengthening domestic demand meant that growth in Japan's imports outpaced that of exports last month.

Imports were up by 18.4% on August 2003, the sixth straight month of increase, while exports rose by just 10.4%.

Finance ministry officials in Tokyo said the decline in the trade surplus was expected to ease now that oil prices had come down from their peaks.

However, economists said slowing demand from Japan's Asian neighbours could give cause for concern.

Japan's export-led recovery over the past two years has depended to a large extent on a healthy appetite for its goods in China and other Asian nations.

But tighter monetary policy in China could hinder Japan's export performance as Beijing battled an overheating economy, analysts said.