Japan's exports are failing to sustain their usual pace

The current account surplus, a measure of the difference between what Japan earns and pays, rose 5.2% year-on-year to 1.63 trillion yen ($15bn; �8.3bn).

The figure contrasts with huge deficits for the US funded largely by investment from Japan and other Asian states.

But Japan's trade balance was weak, amid ongoing concern about the economy.

The growth in the current account surplus was mostly the result of a surge in income from Japanese investments overseas, the finance ministry's figures showed.

Much of the 18.3% growth from April 2004 in investment income came from US and European bonds. Japan is one of the world's biggest buyers of US government debt.

Trade turnaround

On the other hand, while exports grew 7%, imports were up 12%.

Japan has traditionally shown strength in export industries such as cars and electronics which has helped it counteract weakness in domestic demand.

Although the consumer at home is spending more and corporate investment has also grown, economists said the export picture remained gloomy.

"I don't expect a clear recovery in export growth until the second half of this fiscal year (which ends in March)," said Naoki Iizuka, chief economist at Dai-Ichi Research Institute. The Japanese fiscal year finishes in March.

High prices for raw materials such as oil also contributed to the trade problems.

Some observers said they were concerned about a rise in stockpiles of goods in the IT sector.

And the risk of a slowdown in demand from top export markets such as China and the US was also a worry, they said.