Japan Trade Surplus With U.S. Up : U.S. Economists Not Alarmed by Record Figure in Month

Japan’s trade surplus with the United States hit a record $5 billion in October, the Finance Ministry said Tuesday, but U.S. economists were not alarmed by the number.

The October trade surplus exceeded the previous monthly high of $4.8 billion set in September. Nevertheless, several American economists said they continue to believe that the overall U.S. trade deficit has peaked and is beginning a slow decline.

“I’m not disturbed by the numbers,” said Edward Guay, Cigna Corp.’s chief economist. He attributed the bulge mainly to seasonal factors, including heavy shipments of Japanese cars for the new model year and Japanese electronics for the Christmas shopping season.

“You have to look at the whole trade picture. Japan’s only part of the picture,” said Maury Harris, chief economist at Paine Webber. He said the nation’s merchandise trade picture improved for the first time in a decade in the July-September period, after taking out oil trade and adjusting for inflation.

In a related development Tuesday, a Reagan Administration official accused Japan of unfair and illegal trade practices and said that unless Japan changes its policies, Congress is likely to pass legislation that “hits them where it hurts.”

Stopped Chip Dumping in U.S.

Bruce Smart, undersecretary for international trade at the Commerce Department, said that under threat of penalties, Japanese chip makers have virtually stopped dumping semiconductors in the United States below cost or market value. But Smart said Japan is still dumping chips in other countries to the detriment of U.S. chip makers.

“Certainly by the end of the year, we want to see a significant change in what’s happening in third countries,” he said in an interview between meetings with Silicon Valley executives, adding that the United States had Japan on “a very short leash.”

Brisk sales of Japanese cars and business machines boosted Japanese exports to the United States in October to $7.5 billion, up 24.2% from the same month last year, Japan’s Finance Ministry said. Imports from the United States rose by 6% to $2.50 billion.

U.S. and Japanese officials had hoped the Japanese yen’s appreciation against the dollar would help reduce the large trade imbalance, but Japan’s surplus with the United States has continued to grow.

“The bilateral Japanese-American deficit is among the toughest components of the trade deficit. The U.S. should find the improvement in its trade deficit is most likely to occur among the Europeans,” said Richard Hoey, an economist at Drexel Burnham Lambert.

The U.S. trade deficit is expected to set a record $170 billion this year, up from last year’s record $148.5 billion.

In its worldwide trade in October, Japan’s surplus was $7.81 billion, up 80% from a year earlier but down from a record $8.92 billion registered in September, the ministry said.

Overall, Japanese exports in October rose 19.4% from a year earlier to $19.14 billion, surpassing the $19 billion registered in September. Imports fell 3% from October, 1985, to $11.33 billion but gained from the $10.08 billion in September.

Japan excludes shipping and insurance costs from its export calculations but includes them in its import figures. If those charges were included in both exports and imports, the country’s trade surpluses would be even higher.

The Japanese yen has risen by about 58% against the U.S. dollar since September, 1985, making many Japanese products more expensive overseas.

But until foreign consumers make corresponding reductions in their purchases of Japanese products, the stronger yen can actually result in higher Japanese export figures, calculated in dollar terms.

The ministry said exports of Japanese motor vehicles to the United States in October rose 26.8% from October, 1985, to $2.42 billion, and sales of business machines grew 54.0% to $579 million. However, exports of steel to the United States declined by 20.4% to $145 million.

Imports of U.S. motor vehicles surged by 84.9% from the previous October to $5.38 million, the ministry said.