Japan has announced its biggest monthly trade surplus in a year, supporting hopes that the world's second largest economy is slowly recovering from its worst recession on record. Exports exceeded imports for a fourth straight month, giving a vital boost to an economy that is heavily dependent on overseas demand, government data showed.

Japan logged a trade surplus of Y299.8 billion ($A3.96 billion) for May, beating expectations for a figure of Y214 billion ($A2.82 billion), according the finance ministry. While the surplus was 12.1 per cent smaller than a year earlier it was the biggest since an excess of Y341.1 billion ($A4.5 billion) logged in May 2008. Japan's industrial production is recovering as orders from overseas increase, said Hiromichi Shirakawa, chief economist at Credit Suisse, Japan. "We are now entering a recovery phase but is likely to slow after this. It's hard to believe the world economy will stage a sustainable V-shape recovery."


Global demand for Japan's cars, electronics and other exports - the main engine of its economic growth - plunged during the global economic downturn, but there are hopes that the worst of the slump is over

Exports were down 40.9 per cent in May from a year earlier, having recovered somewhat from a record year-on-year fall of 49.5 per cent in February. Imports sank 42.4 per cent last month on lower prices of crude oil and raw materials.This is likely to continue to rebound in the next few months, said Hiroshi Watanabe, economist at the Daiwa Institute of Research.

"The export recovery will boost industrial production at home. The problem is what will happen after that," he said."Japan's main exports are automobiles and electronics - in other words, durable goods for US and European consumers. I do not expect demand for them to grow much in the future," he said.

The trade surplus with the United States was down 52.9 per cent in May from a year earlier while that with the European Union slid 75.4 per cent. The deficit with China shrank sharply to Y860 million ($A11.35 million) from Y40.5 billion ($A534.51 million) a year ago. (The Sydney Morning Herald)