"Japan's sugar demand has fallen significantly in recent months due to the recession and confectionery firms are trying to reduce their high domestic stocks," a trader at a leading trading house said.

Japan's raw sugar imports are expected to fall below 1.5 million tonnes this year, the lowest level since 1.43 tonnes in 1964, the traders said. Imports last year were 1.7 million tonnes, traders said.

Poor demand due to the feeble economy combined with a good sugar beat crop in Japan this year are behind the expected decline in imports, they said.Data released by Japan's finance ministry on Friday showed the country's raw sugar imports in May amounted to 41,573 tonnes. This is considerably down, by 70.4 per cent from 140,550 tonnes the same month a year earlier.

Cumulative raw sugar imports in the first fivemonths of this year totalled 415,509 tonnes, compared with 586,656 tonnes in the same period a year earlier, it said.

Another trader at a leading trading house said: "Imports by major sugar consuming countries in Asia, such as South Korea, Indonesia and Malaysia are likely to fall by around 20 per cent from last year."

He added that India was unlikely to import sugar this year due to ample domestic stocks and the weakening local currency which makes imports more expensive.

In the physical market, hardly any indications have been detected in recent days, with both buyers and sellers retreating to the sidelines. "Physical sugar trade for shipments this year has nearly finished," one trader said. "Market players are wary of taking positions for shipments next year," the trader said.

Expectations that Thai raw sugar production in the 1998/99 crop year will not be as bad as in 1997/98, combined with weakening physical demand, have deterred traders from rushing sugar imports, they said.

Raw sugar futureson the Tokyo Grain Exchange are likely to be a tad firmer next week, but the upside will be capped by a lack of fresh fundamental factors, they said.

On the Tokyo Grain Exchange (TGE), benchmark July ended higher at 30,650 yen per tonne, against Thursday's close of 29,880 yen. These figures are much in line with the gains made in the New York market overnight and the yen's weaker tendency against the dollar.