China becomes Japan's top trade partner

Updated: 2007-04-25 14:52

Japan said Wednesday that China became its top trading partner for the first time since World War II, unseating the United States in the past fiscal year despite strained ties between the Asian giants.

The new milestone came as Japan reported the first rise in its overall trade surplus for two fiscal years, and a sharp increase in March that underpinned optimism in the outlook for Asia's largest economy.

Japan's total trade with mainland China came to 25.43 trillion yen (214.8 billion dollars) in the year to March, against 25.16 trillion yen with the United States, the finance ministry said in a statement.

"This reflects the gradual shift of production by Japanese firms to China. I think the trend of growing trade with China will continue," said finance ministry official Koichi Nose.

The United States is still Japan's largest export destination but Japanese exports to China have been growing in recent years, while imports are strong.

Including Hong Kong, China overtook the United States as Japan's biggest trading partner in 2004.

Japanese manufacturers have been shifting more of their production operations to China, seeking cheap labour costs and a foothold in the fast-growing Chinese economy.

"For Japan, a very large market has emerged next door," said Senshu University economics professor Hideo Ohashi.

The two economies have strong links through direct investment while the flow of goods has increased sharply, ensuring that trade relations between the two Asian giants are likely to remain strong, he added.

Japan was also China's largest trading partner for 11 consecutive years until 2003 but was then overtaken by the United States and European Union.

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