Government data show Japan's merchandise trade surplus dropping by 39 percent in November. That is a much bigger decline than economists had predicted. Imports grew last month by 28 percent but exports rose only a little more than 13 percent. The trade surplus with Asia fell more than 27 percent.
That news comes as Japan's government cut its assessment of the economy for a second straight month.
The Cabinet Office, in its December report, blames the change on weakening production and fewer exports. But the government says it expects the economic recovery to remain on track, because corporate investments and profits are strong.
For the 2005 fiscal year, the Cabinet Office predicts Japan's economy will grow 1.6 percent. That compares with a revised 2.1 percent growth forecast for gross domestic product for the current fiscal year, which ends in March.
Facing massive budget deficits, the Japanese government plans to cut general expenditure seven-tenths of a percent next year.
Finance Minister Sadakazu Tanigaki has unveiled a proposed national budget totaling more than 82 trillion yen - that is about $800 billion.
The finance minister promises that the country will see more tangible signs of fiscal reform in the new budget.
For example, it cuts spending for education and science more than seven percent and public works spending will drop more than 3.5 percent.
In the corporate world, Japan Airlines is planning new spending. Boeing of the United States has bested its European rival Airbus by getting JAL's order for 30 medium-sized jets.
Boeing says JAL has agreed to purchase 30 7E7 jets. They will be ready for service in early 2009. Although a final price has not been determined, industry officials estimate the package will cost at least $4 billion.
Car maker Mazda says it is cutting output of nearly eight thousand vehicles after a fire at one of its factories near Hiroshima. Mazda says operations will not be able to resume at the plant, which accounts for about a third of Mazda's domestic output, before January 6. The fire destroyed about 20 percent of the plant's paint-coating facility.