China became Japan’s largest trading partner in fiscal 2006, which ended on March 31, replacing the United States for the first time since the end of the Second World War, according to preliminary figures released on Wednesday by Japan’s Finance Ministry.

Japan’s trade with China, excluding Hong Kong, rose 16.5 percent in fiscal 2006 from a year earlier, totaling 25.42 trillion yen (about $213.6 billion), while that with the U.S. increased 10.3 percent to 25.16 trillion yen ($211.4 billion). The trade data are measured on a customs-cleared basis before adjustment for seasonal factors and given on a yen-denominated basis.

The rising trend of Sino-Japanese trade is expected to continue amid a thaw in bilateral relations since Prime Minister Shinzo Abe took office last September. Under his predecessor, Junichiro Koizumi, who angered China — and South Korea — by repeatedly visiting the war-related Yasukuni Shrine, Sino-Japanese relations were said to be “hot in business” but “cold in politics.”

Japan’s overall trade surplus with the rest of the world widened 16.4 percent in fiscal 2006 from the previous year to 9.05 trillion yen following a 31.4 percent fall in fiscal 2005. Both exports and imports hit record highs for five years running. Exports grew 13.4 percent to 77.46 trillion yen, led by robust shipments of automobiles and electronic parts, including semiconductors, while imports gained 13 percent to 68.40 trillion yen, led by strong purchases of crude oil and nonferrous metals from abroad, according to the ministry figures.

Since fiscal 2004, Japan’s trade with China, including Hong Kong, a special administrative region that returned from British to Chinese rule in 1997, has already been bigger than that with the U.S. The fiscal 2006 figures show further deepening economic interdependence between Japan and China.

Japan’s exports to China soared 21.2 percent to a record 11.31 trillion yen in fiscal 2006, while imports from the country increased 13.0 percent to a record 14.11 trillion yen. As a result, Japan registered a trade deficit of about 2.8 trillion yen, down 11.2 percent from the previous year. Japan’s trade with Hong Kong totaled 4.53 trillion yen in fiscal 2006.

Meanwhile, Japan’s trade surplus with the U.S. rose for the third year running, increasing 13.5 percent to 9.09 trillion yen in fiscal 2006, the second-largest ever level. The largest surplus, 9.66 trillion yen, was logged in fiscal 1985.　In fiscal 2006, Japan’s exports to the U.S. totaled 17.12 trillion yen, up 11.1 percent, while imports amounted to 8.03 trillion, up 8.6 percent.

But a Finance Ministry official brushed aside some concerns that the nation’s huge trade surplus could become a fresh source of friction between Tokyo and Washington. “The United States’ trade deficit with Japan is the third largest after that with China and the European Union, while Japan’s surplus (with the United States) was the largest in fiscal 1985,” the official said. “So, we assume that our trade surplus would not be so outstanding and would not have much repercussions,” the official added.

Among other major trading partners, Japan’s trade with the 27-nation European Union (EU) amounted to 18.38 trillion yen in fiscal 2006. Japan logged a trade surplus of 4.21 trillion yen with the EU.

Japan’s trade with the 10-nation Association of Southeast Asian Nations (ASEAN) totaled 18.62 trillion yen. Japan posted a trade deficit of about 359 billion yen with ASEAN.

Japan’s trade with South Korea totaled 9.17 trillion yen, with exports rising 11.9 percent to 6.01 trillion yen while imports increasing 10.0 percent to 3.16 trillion yen. As a result, Japan’s trade surplus with South Korea came to 2.85 trillion yen.

In March alone, Japan’s overall trade surplus with the rest of the world surged 73.9 percent from a year earlier to about 1.63 trillion yen. Exports in the month climbed 10.2 percent to 7.51 trillion yen, while imports were flat at 5.87 trillion yen.

Hisane Masaki is a Tokyo-based journalist, commentator, scholar on international politics and economy and a policy committee member of the Japan Forum on International Relations, a leading Japanese think tank on international affairs.

This article originally appeared at Oh My News on April 26, 2007.