RTTNews - Japan's trade surplus declined in May as exports dropped more than expected from the prior year due to weak global demand.

The trade surplus plunged to JPY 299.83 billion in May from JPY 341.1 billion recorded during the same period of the previous year, the Finance Ministry said in a report on Wednesday. However, the trade surplus stood above the expected level of JPY 210 billion.

Exports tumbled 40.9% on a yearly basis to JPY 4.02 trillion in May. Annual decline was smaller than the 39.1% fall witnessed in April but larger than a 39.3% fall expected by economists.

At the same time, imports declined 42.4% to JPY 3.72 trillion. Imports also slipped more than an expected drop of 41.1%.

Exports to the U.S. were down 45.4% and imports by 40.3% in May from the previous year. Motor vehicle sales to the U.S. dropped 54.8%. Meanwhile, total shipment to China was down 29.7% and that to Asia slid 35.5%.

Elsewhere, the Bank of Japan reported a record decline in Japanese corporate service prices in May. The corporate services price index fell 3% annually in May, which was the largest decrease since records began in 1985 and the eighth consecutive fall. The index measures prices paid by companies for services.

From April, corporate services price decreased 0.3% in May, slightly larger than the 0.2% decline seen in April.

Earlier in the day, a BoJ board member, Seiji Nakamura told business leaders in Niigata that the central bank should continue to buy corporate bonds and commercial papers from banks. But it is important that the extraordinary steps are implemented at an appropriate size for an appropriate period of time. These extraordinary measures were intended to continue until the end of September.

He said corporate financing conditions could remain severe and uncertainties for the economic outlook stay high.

According to the Washington-based World Bank, the Japanese economy is set to contract 6.8% in 2009 and the world economy will shrink 2.9%, larger than its earlier prediction of a 1.7% decrease.

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