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Japan's Trade Surplus Soars in February

Asia: Aggressive export strategy combined with sluggish imports lead to 49% expansion.

April 13, 1998|From Bloomberg News

Japan's current account surplus surged in February, the first expansion in five months, as imports slowed on the back of weak sales at home and exports to the U.S. and Europe continued to rise, government figures showed.

The current account surplus expanded 49% to $12.2 billion from January, the Finance Ministry said. That was much more than the 12.8% gain forecast by economists and follows a 4.5% slide in January. Exports fell 4.7%, while imports plunged 15.8%.

In Tokyo trading, the yen continued to strengthen, rising to 128.25 against the dollar early today from 128.65 Friday.

The yearlong slump in domestic sales of automobiles, homes and machinery, plus slowing capital spending and public works, has hurt steel, car and electronics companies. These industries, while boosting exports to the West, are taking another hit because of sliding exports to South Korea, Thailand and other countries that have seen the value of their currencies sink.

"We've already had a pretty tough last half-year, and we're expecting production to slow even further in the April-June quarter," said Takashi Nakai, a spokesman for Nippon Steel Co., Japan's largest steelmaker.

From February last year, the surplus in the current account--the broadest measure of goods and services flowing in and out of Japan--expanded 97% to $12.99 billion, more than the 67.9% rise economists forecast.

Those numbers highlight the strategy at Honda Motor Co., Toyota Motor Corp. and Daihatsu Motor Co. of sending more cars to the U.S. and Europe. That, in turn, has prompted officials in those countries to accuse Japan of relying too heavily on exports for growth.

Still, government officials continue to say that the current account surplus won't grow rapidly in the long term because exports to Asia are slowing and domestic spending and imports will soon start growing.

Last month, the Finance Ministry adopted the U.S. standard for seasonally adjusting trade figures. The new method, developed by the U.S. Census Bureau, shows that earlier gains in exports and declines in imports were more muted than previously announced.

Figures comparing the surplus with the previous month more accurately reflect fluctuations in the number of workdays and other seasonal variations.

The U.S. and Europe have urged Japan to boost domestic spending and import more from its Asian neighbors. The U.S. is worried that Thai, Indonesian and South Korean companies will start dumping goods in the West, undercutting American companies.

Prime Minister Ryutaro Hashimoto last week announced $31.19 billion in new income-tax rebates for this year and next as part of a $77.98-billion spending package to pump up growth. That likely will keep Japan from slipping into recession for now, though its impact on neighboring countries may not be seen for months, economists said.

That's because manufacturers like Toshiba Corp. and Hitachi are cutting output as they try to reduce bloated inventories of computers and air conditioners. As a result of the huge stockpiles, imports of raw materials like fuels, plastics and metals used in the production process aren't likely to turn around soon, economists said.

Imports of oil, lumber and automobiles fell the most.

Japan's investment account, which tracks profits repatriated from holdings overseas, rose 9.1% in February. The account was $4.67 billion in surplus, $398 million more than in January.

Japan was a net buyer of services, spending $3.21 billion more for air, freight and other services than it sold.

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