trade," said Yukari Sato, chief economist at Credit Suisse First Boston Securities (Japan) Ltd.

Economists and government officials predict that Japan's trade with China will grow further, given lower tariffs and an improving investment climate spurred by China's entry into the World Trade Organization in 2001.

According to the report, Japan's worldwide trade surplus in 2004 grew 17.9 percent from the previous year to 12.01 trillion yen for the third straight year of increase.

Exports increased 12.2 percent to 61.18 trillion yen and imports grew 10.8 percent to 49.17 trillion yen.