Japan's merchandise trade balance surplus widened in October more than forecasts as exports fell the least in one year to signal increasing world demand. The Japanese exports sector continued to show clear signs of recovery supporting the world's second largest economy to emerge from the worst postwar recession.

Japan's merchandise trade balance total recorded a surplus of 807.1 billion yen in October compared with a previous revised surplus of 525.3 billion yen from 465.5 billion yen, and it came higher than the forecasted 465.5 billion yen. The Adjusted merchandise trade balance recorded a surplus of 419.1 billion yen compared with a prior 58.6 billion yen, while analyst's forecasts referred to 300.0 billion yen.

Merchandise trade exports declined 23.2% in October from a year earlier following a decline by 30.7% that was revised to 30.6%, and it came better than the anticipated decline by 26.8%. As for imports, it declined 35.6% in October from a year earlier compared with 36.9% and it was expected to drop 34.0%.

However, more than $2.2 trillion of stimulus spending by governments' around the world helped demand to pick up after the sever impact of the worst financial crisis since the great depression. Demand from China Japan's first trade partner, increased after the Chinese economy expanded 8.9% in the third quarter and its industrial production continued to rebound boosting sales for Japanese manufacturers.

Yet, the volume of exports to the U.S declined 21.1% in October from a year earlier, while exports to Europe fell 26.8% and shipments to other countries in the Asian region still 1.9% less than last year's levels.

Despite we witnessed exports increasing recently, still the decline in commodities prices threatening corporate earnings and income levels which is pressuring domestic demand and household spending, as a result economic recovery may slow in the first half of next year.

The rising yen value is also threatening the nation's shipments especially that the Japanese government is seeking a strong recovery based on advancing exports, worth mentioning that the Japanese yen gained 7.4% against its American counterpart in the quarter ended September.

Imports remain weak amid fragile domestic demand especially that unemployment still high and wages are declining, noteworthy that jobless rate settled at 5.3%. The domestic demand deflator that measures price levels excluding the cost of imports declined 2.6% in the third quarter the lowest since 1958.

The yen gained against major currencies since the release of today's fundamentals and it is trading around 88.33 against the dollar at 1:25 GMT, while it is trading around 132.28 against the euro and 146.77 against the royal pound.