For the first time in three years there is a surplus in Japan's trade with China and China has for the first time replaced the US as Japan's largest trading partner. China is also the largest importer of goods from Japan.

According to a recent report from the Japanese finance ministry, in 2006, Japan's trade with China was valued at 25.4276 trillion yen while its trade with the US was valued at 25.1608 trillion yen.

Trade center shifts to China

In 2002, China was responsible for 38% of Japan's economic growth, but in 2006, this rate reached 68%. China's fast economic growth is the main reason for Japan's export surplus with China.

Zhong Naiyi from Shanghai International Affairs Research Institute said Japan's trade center is shifting east. For a long time, the EU and the US have been Japan's most important trading partners. As the global trade pattern changes and the US economy slows, Japan is constantly increasing investment in China, bringing Sino-Japanese economic and trade cooperation closer and closer.

According to data from Japan's finance ministry, since 1999, Japanese exports to China have set record highs. In 2005, the value of Sino-Japanese trade reached US$189.3 billion, making Japan one of China's three largest trading partners. As of the end of 2005, Japan's accumulated investment in China had reached over US$70 billion to make it the main source of foreign investment in China.

Although in recent years Sino-Japanese political relations have appeared cold, bilateral trade and investment have increased substantially. Chinese Premier Wen Jiabao's "ice-melting" visit to Japan from April 11 to 13 will help give even momentum to Sino-Japanese economic cooperation.

Japanese economic analysts say that 2006 was a good year for Sino-Japanese economic relations. The relaxation of political tensions is not only conducive to the smooth development of bilateral economic relations, but also a turning point for the two countries in coordinating and dealing with problems facing the Asian economic community.

Sino-Japanese trade pattern hasn't changed

In March, Japan's trade surplus with China reached 12.33 billion yen, the first surplus in three years.

In the long run, Japan's short term increase of exports to China will not affect the pattern of Sino-Japanese trade. Analysts believe that the reason for the surplus in March is that March is the last month of Japan's fiscal year and usually exports in this month are larger than in other months. The appreciation of the RMB has also promoted an increase of Japanese exports to China.

In China, analysts say, the drop in exports in March was due to an expectation that China would readjust the export tax. Many exporters tried to export more in January and February before changes to the tax policy. This year the Chinese Spring Festival also fell in February. The effect of this was felt in March.

Insiders say that they are not surprised at such a phenomenon because in the first three months of this year, China's total trade surplus reached US$46.4 billion, almost double the same period of last year when it was $23.3 billion dollars. This suggests that the increasing trend has not changed.

China is still expecting a huge trade surplus this year. This will put even greater pressure on the Chinese government to allow the RMB to appreciate.

Editor: Yan