TOKYO, Jan. 26--China including Hong Kong replaced the United States as Japan's largest trade partner in 2004 for the first time since World War II, the finance ministry said Wednesday.
Japan's trade with China, including the administrative region, totaled 22.2 trillion yen ($214 billion) last year, outpacing the 20.5 trillion yen with the United States.
With China alone, Japan had a trade deficit of 2.20 trillion yen, up 5.0 percent from 2003, as exports rose 20.5 percent to 7.99 trillion yen and imports rose 16.8 percent to 10.19 trillion yen.
"As China's economy continues to grow, we will see a further expansion of trade between the two countries," a ministry official said.
China is both a global manufacturing center backed by cheap labor and land, and a consumer market growing on the back of an emerging middle class hungry for cars and electronics products.
Low-priced Chinese-made goods have been flowing into the Japanese market while Japanese firms are boosting their factory capacity and sales networks in the neighboring country.
Last week, Prime Minister Junichiro Koizumi promised to mend fences with China, saying bilateral rows should not hurt trade.
"Even if we (Japan and China) have different opinions, I will enhance cooperation in wide-ranging fields from a broader viewpoint," he told parliament.
In 2004, Japan's trade surplus with Asia rose 32.9 percent to a record 7.43 trillion yen as exports gained 17.1 percent to a record 29.6 trillion yen with imports up 12.6 percent at a record 22.2 trillion yen, the ministry said.
Japan's overall trade surplus in 2004 hit a five-year high at 12.0 trillion yen on the back of brisk exports to Asia.
Meanwhile, Japan's trade surplus with Asia in December fell 2.3 percent to 706.9 billion yen ($6.9 billion) as exports of hi-tech products slumped.
Asia-bound exports, which account for some 50 percent of Japan's total shipments, grew 7.5 percent to 2.63 trillion yen from a year earlier with imports expanding 11.7 percent to 1.92 trillion yen, the ministry said.
"The surplus fell slightly as our exports of hi-tech products dropped and a surge in oil prices lifted the value of imports," said the finance ministry official.

SINGAPORE,
Jan. 26--Asia's growing numbers of budget airlines could service hundreds of big cities that currently have no international air links if governments ease restrictions, a leading aviation analyst said Wednesday, AFP reported.
The Center for Asia Pacific Aviation's managing director, Peter Harbison, told a seminar on low-cost airlines there were 130 cities in Asia with populations of more than one million people and a further 105 cities with more than 500,000.
Harbison said the "vast majority" of these cities were not serviced by international airlines.
"The potential for route expansion, as economic development pushes millions more people through the travel threshold, is vast," he said.
Harbison cited China, Japan, India and Souteast Asia all as areas with enormous budget airline potential.
He said low-cost airlines were already taking up 16 percent of the 916 current orders for aircraft in the Asia Pacific region.
However, he said governments in the region must liberalize the aviation industry if budget airlines were to reach their potential.
"The rate of liberalization will decide the speed and success rate of low cost carriers. They have a big future but there are certainly some road bumps ahead," he said.
Harbison outlined air service agreements, aircraft ownership and control, and entry rules as areas subject to restrictions and inhibiting budget carriers.
Regional airports have a role to play as well, such as adapting their operations to accommodate dedicated low-cost terminals, he added.

WASHINGTON, Jan. 26--The White House estimated on Tuesday that the US budget deficit for 2005, including an extra $80 billion for Iraq and Afghanistan operations, will total $427 billion, Reuters reported.
"In the 2006 budget that we release on Feb. 7, OMB will estimate that the 2005 deficit, including the outlay effects from the supplemental we are discussing today, will be 3.5 percent of GDP or in nominal terms $427 billion," said a senior administration official in a news briefing.
He referred to supplemental spending of more than $80 billion for military operations in Iraq and Afghanistan, making the White House estimate for the deficit higher than the $368 billion forecast by the Congressional Budget Office.
White House spokesman Scott McClellan insisted on Tuesday that the Bush administration was still on course on its goal of reducing the deficit in half over five years by promoting economic growth and controlling government spending, although analysts are skeptical it can be done.
Bush is under pressure to bring down the budget deficit as a way of restoring faith in the dollar, whose tumble against other currencies is increasingly being viewed with concern in global capitals.

NEW YORK, Jan. 26--US oil prices flirted with $50 on Tuesday, jumping to their highest level in eight weeks after a fire at a big Louisiana refinery slowed the plant's fuel production, Reuters reported.
The gains built on recent strength from a cold snap in the Northeast that fired up furnaces in the world's largest heating oil market and on trader jitters ahead of an OPEC production policy meeting Jan. 30.
New York crude settled up 83 cents to $49.64 a barrel, after hitting a peak of $49.75 in open-call trade, the highest level since Nov. 30. London Brent gained 95 cents to $46.96 a barrel after hitting $46.99, the highest since Nov. 4.
Dealers said the strength tracked a rally in gasoline futures after ConocoPhillips confirmed it had been forced to slow production at its Belle Chasse, Louisiana, refinery after a fire on the weekend.
New York gasoline futures surged 4.55 cents to $1.3445 a gallon after hitting $.13480 in open-call trade, the highest level since late October.
Oil prices have been climbing steadily in recent weeks as arctic cold blew into the US Northeast after a mild start to the winter, boosting demand for heating oil.
US supplies of the key winter fuel were running about 4 percent below last year, according to the most recent government figures, and analysts were predicting the cold would trigger further declines in stockpiles.
The market on Tuesday also drew support from concern about attacks on Iraq's oil infrastructure with the election there approaching, and from disruptions in Nigeria.
Iraq's southern crude supplies have flowed relatively smoothly at about 1.5 million barrels per day (bpd) in the run up to the elections, though the country's northern exports have been halted for more than a month.
Royal Dutch Shell Group said Tuesday it shut 35,000 barrels per day of crude oil production in Nigeria's southeastern Abia state following community protests, continuing a spotty record from the oil-rich nation.
Talks to avert a planned strike by Nigeria's main oil unions were adjourned to Wednesday after failing to resolve a dispute over alleged police harassment of local workers, union leaders said on Tuesday.
Oil traders are also on alert for any surprises on Jan. 30, when the Organization of the Petroleum Exporting Countries meets to debate production policy.

Many European consumers and environmentalists fear GM crops might pose a hidden risk to health or wildlife.

ROME, Jan. 26--Italy's parliament approved on Tuesday legislation the government said would pave the way for farmers to safely plant genetically modified crops, if they choose to do so, Reuters reported.
But biotechnology supporters complained the bill would essentially uphold a "medieval" moratorium based on backward ideas about genetically altered crops.
The so-called "co-existence" law sets out rules to ensure conventional and organic crops are not contaminated by GM seeds, part of a web of European Union legislation aimed at allowing a controlled opening of the market to GM organisms.
But it will be up to each of Italy's 20 regions to set the detailed rules and most of them have said they want to remain GM-free, effectively maintaining an unofficial EU-wide ban on GM foods which was formally lifted earlier this year.
Agriculture Minister Gianni Alemanno, who sought jail time for farmers who broke the rules, said he was "very pleased" by the legislation's final passage in the Senate on Tuesday. It won approval in the lower house last week.
"We sought to... guarantee freedom of choice for Italian producers, while heading off the risk of diffuse and uncontrolled contamination by GM (organisms)," he was quoted as saying by ANSA news service.
Roberto Gradnik, president of pro-bioindustry group Assobiotec, complained to local media the approval of the legislation was a step backwards.
"With this medieval-flavored decision, our country denies to agriculture companies the freedom to choose to cultivate plants that are genetically modified," he said.
Any attempt to impose a blanket ban on GM farming would probably have prompted legal action from the European Commission, which has to ensure that use of such plants is allowed as long as they have passed safety tests.
Many European consumers and environmentalists fear the crops--whose genetic makeup has been altered, often for resistance to pesticides--might pose a hidden risk to health or wildlife.

Tourists near Dolmabache Palace in Istanbul, Turkey (AFP Photo)

ANKARA, Turkey, Jan. 26--Turkey earned $15.9 billion from its booming tourism sector in 2004, a year which saw a record number of foreigners visiting the country, the state statistics institute said Wednesday, AFP reported.
The figure represents a 32.5-percent increase from tourism revenues in 2003.
Foreign visitors spent $12.1 billion in the country last year, while local tourists contributed another $3.8 billion to the sector, the institute said.
The number of foreigners visiting Turkey increased by 24.8 percent to a record 17.5 million last year compared to 2003, the tourism ministry announced earlier this month.
Germans formed the largest group with 3.9 million, while Russians were second with 1.6 million and Britons third with 1.3 million.
Tourism was Turkey's leading source of foreign earnings in 2003 with 14 million tourists and $13.2 billion in income.

BRUSSELS, Belgium, Jan. 26--Europe must make economic growth and jobs its top priorities over the next five years to rejoin the path to long-term prosperity, according to a strategy paper by the new EU executive to be presented on Wednesday.
"The most urgent issue facing Europe today is the lack of growth and job creation that safeguards the standard of living and social protection Europeans have grown used to," said a draft of the document obtained by Reuters on Tuesday.
The 2005-2009 strategic objectives will be presented to the European Parliament by European Commission President Jose Manuel Barroso, who earned his reputation as a market-oriented reformer while prime minister of Portugal.
His paper does not propose grand new projects for the 25-nation European Union and nor does it attempt to reinvent the wheel: the aim is to "take the Europe we have and make it work".
It also stresses the economic agenda and focuses less on the EU's fledgling common foreign policy, on which many member states believe the Commission should have little or no say.
That approach echoed the days of Jacques Santer, Commission president from 1995-1999, whose own five-year program motto was "do less, but do it better".
The report points to widespread public indifference to the EU and suggests that this is due to sluggish economic growth, a sense of economic and personal insecurity and a "feeling of disconnect" between Brussels and people's everyday lives.
"Europe is ... at a crossroad," it said. "Europe can regain trust if its leadership sets out a clear and compelling vision of the direction in which the Union should be heading in the second half of the decade, and demonstrates it has the policies and commitments to meet this vision."
The document says the EU has failed to reap the full benefits of its single market and single currency, with growth and productivity lagging those of its major economic partners.
A scathing report prepared for the EU by former Dutch Prime Minister Wim Kok last year found that since 1996 the bloc's average annual growth, in terms of output per head, has been 0.4 percentage points below that of the United States.

SEOUL,
South Korea,
Jan. 26--South Korean car exports jumped some 40 percent to $32.6 billion in 2004, an industry group said Wednesday, AFP reported.
Brisk exports to the United States, where sales of South Korean-made cars increased 21.2 percent to a record 780,000, led the good performance, the Korea Automobile Manufacturers Association said.
South Korea's largest carmaker Hyundai Motor sold 418,615 vehicles in the United States for 2.5 percent of the world's largest auto market, while its affiliate, Kia Motors, sold 270,055 for a 1.6 percent market share.
GM Daewoo Auto and Technology, the South Korean affiliate of US General Motors, sold 94,312 vehicles in the US market last year, the association said.
In Western Europe, the three major South Korean carmakers sold 590,851 vehicles, up 26.4 percent from 2003 to win a 4.1 percent share of the market, the association said.
Automobiles became the country's number one export item last year, accounting for 12.8 percent of total exports of $254.20 billion, it said.
In contrast, South Korean domestic sales dropped 17 percent in 2004, reflecting sluggish consumer spending.