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. Last Updated: 07/27/2016

Trade Figures Point To Japan's Recovery

TOKYO -- Japan's rising trade volume gave new evidence Wednesday that the world's second largest economy is gradually emerging from its worst postwar recession, although economists said private consumption showed signs of fragility.

"I still think the economy can achieve 1 percent growth, in line with government predictions, but uncertainty remains over whether private demand will start to lead the economy," said Hisashi Yamada, senior economist at Japan Research Institute, referring to the growth target for the year starting in April.

The Finance Ministry said Japan's customs-cleared trade surplus for December fell 20.4 percent from a year earlier to 1.12 trillion yen ($10.6 billion), while a 15.8 percent rise in imports exceeded a 3.4 percent increase in exports.

In 1999, the surplus declined 11.7 percent from the previous year to 12.35 trillion yen, the first fall in three years. But the amount was the second highest on record.

Economists interpreted the higher exports as showing a tentative economic recovery while the rise in imports signaled a pickup in domestic demand.

The economy was expected to continue to improve gradually, but whether it could achieve a full-fledged recovery largely depended on prospects for personal consumption and capital spending by companies, analysts said.

"I think consumption will increase, and with financial sector worries out of the way, I think conditions are improving despite weaker employment incomes," said Shuji Shirota, senior economist at SG Securities.

Less reassuring were figures from the Ministry of International Trade and Industry that showed retail sales fell 1.2 percent in December from a year earlier due to weaker demand for winter goods caused by unseasonably warm weather.

Although the government outlook for retail sales was bright, economists said continued weakness in incomes was likely to prevent private spending from rising sharply for a while.

Annual spring wage negotiations could bring an unwelcome surprise if workers surrender gains in incomes in return for job stability, economists said.

"Disposable income for consumers is still under pressure," said Chris Calderwood, senior economist at Jardine Fleming Securities.

Government officials, too, have said private consumption, which accounts for around 60 percent of gross domestic product in Japan, is crucial to achieving a sustaining recovery.

With private consumption and capital investment still fragile, the economy has recently depended on support from injections of government spending and a pickup in exports and production.

Some economists saw the stronger-than-expected rise in imports as a signal of improved domestic demand.

"From this data ... I have the impression that the economy is recovering," said Tomoko Fujii, an economist at Nikko Salomon Smith Barney.

Others were more cautious.

The Japan Research Institute's Yamada said the rise in imports could even start to dampen domestic production.

The government hopes a record 85 trillion yen budget for the fiscal year starting in April will finish the job of dragging the economy out of its prolonged recession, and by the end of this year, private demand - instead of hefty spending on public works - would start to drive the economy.

Economic Planning Agency Minister Taichi Sakaiya said Tuesday that Japan could reach growth of 2 percent to 3 percent a year in fiscal 2001-2, compared with the official target of 1 percent.

GDP is forecast to grow 0.6 percent in the year ending in March.