Japan's trade surplus with US slumps in July

A stronger yen dragged down Japan's exports in July, according to official figures

Japan's politically sensitive trade surplus with the United States shrank sharply in July, according to official data published Thursday, as the two allies continue to cross swords over US trade policy.

The surplus with the US shrank 22.1 percent with reduced shipments of motor vehicles and microchip-making equipment dragging down the figure.

Despite a close political and economic relationship, Japan was not spared from President Donald Trump's tariffs on steel and aluminium products and Tokyo has warned it could retaliate at the World Trade Organization.

Top officials from both sides met in Washington last week but no breakthrough was announced after the talks.

Overall, Japan logged a trade deficit of 231.2 billion yen ($2 billion) last month, compared to a surplus of 406.6 billion yen recorded in the same month last year.

With the yen strengthening against the dollar, exports registered their slowest growth in four months, rising 3.9 percent year-on-year. Meanwhile, imports jumped 14.6 percent.

Japan's deficit with its biggest trading partner China shrank 17.8 percent as exports rose 11.9 percent, a double-digit rise for the fifth consecutive month.