Japan’s Global Trade Surplus Soars 79% to Record $82.6 Billion in Year
Despite a decline in the volume of its exports, Japan’s global trade surplus rose by 79% in 1986, reaching a record $82.6 billion, the Finance Ministry announced Friday. In 1985, the surplus was $46.1 billion.
The increase is expected to apply still more pressure for a continuation of the rise in the yen’s value and to fuel criticism of Japan in the United States and the European Economic Community.
Using a method that produces different statistics from those announced by the U.S. Commerce Department, the Finance Ministry also said Japan’s trade surplus with the United States increased by 30% last year to reach $51.5 billion. American statistics for the full year of 1986, which will be announced soon, are expected to show a deficit of about $60 billion for the United States in its trade with Japan.
Nonetheless, the Japanese figures represent another record surplus in trade with the United States and a deepening of the country’s reliance upon the American market. Last year, Japan sold 38.5% of all of its exports to the United States, up from 37.2% in 1985. It was the seventh consecutive year in which a record had been set for a surplus with the United States.
Japan’s trade surplus with the European Economic Community also set a record, at $16.7 billion, the ministry reported. This was an increase of 50%.
According to the government’s index, Japan’s global exports declined 1.2% last year while imports expanded by 12.5%, the Finance Ministry said. A 15-month increase of more than 50% in the value of the yen, however, drove up the dollar value of the exports by 19% to $209.5 billion.
In terms of yen value, exports dropped 15.9%, underscoring the fact that Japanese manufacturers have not raised the dollar prices of their exports to the extent needed to make up for the rising level of the yen. Before the finance chiefs of Japan and four other industrial nations agreed on Sept. 22, 1985, to drive down the value of the dollar, Japanese exporters received 242 yen for each dollar’s worth of exports. On Friday, they were able to obtain only about 153 yen to the dollar.
The 1986 plunge in the yen value of exports was the greatest decline since the end of World War II.
Japan’s global imports amounted to $126.5 billion in 1986, down 2.3% in dollar value.
Increases of 24% in the dollar value of exports of automobiles and 29.9% in general machinery provided much of the spur for the gain in the value of global shipments.
Pointing to the quantitative decline in exports and increase in imports, the Finance Ministry predicted that Japan’s surplus would start to show a decline in dollar figures if the yen’s exchange rate stabilizes. However, ministry officials said still larger increases in monthly trade surpluses are likely if the new spurt in the yen’s value, which began this month, is not halted.
On Friday, the yen closed at its third-highest closing level since the end of World War II--153.10 to the dollar in Tokyo and 153.22 in New York. Since Dec. 31, when the yen closed at 160.10 to the dollar, it has gained 7% in value against the dollar.
Satoshi Sumita, governor of the Bank of Japan, reiterated that the central bank would continue to intervene forcefully in foreign exchange markets, as it has been doing for more than a week in an attempt to halt the yen’s rise.
“Should the yen appreciate in value above its present level, the deflationary effect on Japan’s economy will be extraordinarily severe,” he said in a speech in Tokyo.
The most recent spurt in the yen’s value has precipitated both calls for and rumors about yet another reduction in the central discount rate at which the Bank of Japan loans funds to commercial banks. The aim of lowering interest rates would be to counteract the deflationary effect of a rising yen. Sumita, however, reiterated that the central bank has no intention of cutting the rate, which after four reductions last year stands at an all-time low of 3%.
Toyoo Gyoten, deputy finance minister for international affairs, is scheduled to leave Monday to visit Washington. Although his trip was described as a private one, he will attend a non-governmental monetary conference in which other monetary officials, including Paul A. Volcker, chairman of the Federal Reserve Board, will participate.
Gyoten is expected to sound out Volcker about the United States joining in foreign exchange market intervention to halt the rise of the yen in line with a joint declaration issued last Oct. 31 by Finance Minister Kiichi Miyazawa and Treasury Secretary James A. Baker III.
The two finance chiefs agreed then that the exchange rate prevailing at that time--160 yen to the dollar--was “broadly consistent with . . . underlying (economic fundamentals).”
So far, Japan has not openly asked the United States for joint intervention to halt the yen’s rise, for fear of stirring up additional protectionist sentiment in Congress. As the value of the yen goes up, Japanese exporters must either charge more in dollar prices for their products sold in the United States or earn less in yen revenue from such sales.
