West Germany, Japan Posting Huge Surpluses : Record Trade Figures Expected to Fall in '88

From Times Wire Services

Japan and West Germany posted record trade surpluses last year, according to reports released Friday, but the excesses are seen easing some in 1988 due to their rising currencies and global demands that trade imbalances be cut.

Japan's Finance Ministry said on Friday that the trade surplus increased to $96.46 billion in 1987 from the previous record of $92.83 billion in 1986.

Exports increased more than 9%, while imports rose over 13%, it said.

Economists said that the sharp rise of the yen meant that Japan's exports fetched more in dollar terms last year, even though the actual volume of shipments declined.

This so-called J-curve effect is expected to peter out this year, leading to a decline in the surplus, they said. This is an economic model that shows that a rise in a currency first boosts a country's trade position by lowering import costs but later weakens it by depressing exports.

'Appears Disappointing'

The figures announced Friday contrast with trade data released earlier this month, which showed that Japan's surplus fell last year.

Friday's figures were calculated on an internationally accepted basis in which cost, insurance and freight charges are stripped out of the value of both exports and imports.

The earlier figures were calculated with those charges included for imports but excluded for exports. That effectively bloated the value of imports.

The ministry said on Friday that the current account surplus, which includes trade in services as well as goods, also rose to a record last year.

The current account surplus increased to $86.69 billion last year from the previous record of $85.85 billion in 1986.

"At first this (higher yearly trade) figure appears disappointing because there is no improvement (over 1986's $92.83 billion)," said Fuji Bank economist Masaru Takagi. "But it is only temporary as the basic trend is toward an improvement in the balance."

Japan's surplus had been shrinking over the past months but sharp gains early in 1987 boosted the year's surplus to a record, said Kazutoshi Habamura, economist for Nikko Research Center.

Takagi said he foresaw Japan's trade surplus in the 1988 financial year, which starts in April, sliding to $90 billion from the $97 billion he estimated for the current year.

West German View

"This would be some improvement, but I must stress that there is still a problem because we can expect no dramatic changes," Takagi said.

The West German Federal Statistics Office said the nation's surplus surged to $70 billion in 1987 from $67 billion the previous year.

The United States and other trading partners have been pressing the two nations to enact policies to lower the amount they export and raise the amount they import.

The West German trade figure was released a day after Economics Minister Martin Bangemann pledged that West Germany would cut its massive surpluses. But economists see only modest declines in the year ahead.

"We expect to see a large surplus of about $60 billion this year and moderate growth in exports," said Richard Reid, chief European economist at UBS-Phillips & Drew.

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