Japan Predicts Big Surplus in 1986 Current Account

Minister of International Trade and Industry Michio Watanabe predicted Thursday that Japan’s current account surplus will rise by more than 50% to $77 billion in the present fiscal year.

Watanabe’s remarks were the first time that a Cabinet minister has acknowledged publicly that the government’s official forecast of a $50-billion surplus in the current account will be far off the mark. The current account includes both merchandise trade and such non-trade transactions as shipping, insurance and tourism.

Meanwhile, the dollar hit a postwar low against the yen for the second straight day. The dollar closed Thursday at 156.95 yen in foreign exchange trading in Tokyo, compared to Wednesday’s closing price of 158.30, which was also a record.

The relative value of the yen has now risen 54.2% since last September, 2.5% of the gain coming since last Friday in the aftermath of the U.S. Federal Reserve Bank’s decision to cut to 6% from 6.5% the discount rate that it charges on loans to its member banks. Japan’s central bank refused to follow that reduction with one of its own.

‘Recessionary Effect’

Watanabe, speaking at the Foreign Correspondents’ Club, said the yen value of Japan’s exports had declined by 15% in the first half of the year. Reductions in exporters’ yen revenue will be at least 18% in the near future, “producing a recessionary effect” in Japan’s domestic economy, he said. He added that “if things are left as they stand now,” this decline in revenue will cut growth in fiscal 1986 to 2.5%, compared to the government’s goal of 4%.

Although Prime Minister Yasuhiro Nakasone has promised to enact a supplementary budget of about 3 trillion yen ($19.1 billion) this fall, he also has supported the Finance Ministry in its demands for still more cutbacks in spending to reduce deficit financing in the regular fiscal 1987 budget. Limits on the amount that each ministry and agency may request for next year’s budget are scheduled to be fixed Monday.

Watanabe said exports, in dollar value, had risen 20% in the first six months. Combined with lower prices for imported oil, the higher dollar value of overseas shipments will raise Japan’s current account surplus by more than 50% to $77 billion in fiscal 1986, he said.

Dollar May Fall More

Meanwhile, 11 leading exchange dealers, polled by the newspaper Yomiuri Shimbun, predicted that the dollar’s value will fall still more, into the low 150s, in the near future.

The dealers, representing banks, trading companies and insurance firms, all cited sluggishness in the American economy and continuing large Japanese trade and current account surpluses as the basis for their prediction.

The rise in the yen’s relative value came after Nakasone complained that the benefits of appreciation, which drives down the yen prices that importers pay for foreign products, have not been passed on to Japan’s consumers. He instructed government officials to take measures to drive down consumer prices, which in June had risen 0.7% in the previous 12 months despite a 10.1% decline in wholesale prices during the same period.