Japan Trade Surplus Off, U.S. Investments Slow

Japan’s trade surplus declined in March for the third consecutive month, the government said Monday in a report that also showed Japan has slowed its U.S. investments.

Japan reported an $8.12-billion surplus for March in its current account balance of trade of merchandise and services, down from $8.49 billion for the same month last year. Trade in goods eased to a surplus of $9.24 billion from $9.39 billion.

In February, a month with fewer days, the current account surplus was $6.85 billion, while trade of goods was $7.44 billion.

Japanese money flowing into U.S. Treasury bonds and other long-term investments dropped to less than half the amount going abroad in February or in March last year.

“This trend will continue. The amount may recover in April or May but the speed of long-term investment outflows will slow,” said Bank of Tokyo Ltd. economist Soichiro Akahane.

Outflows of long-term Japanese investments, minus the amount of similar investments coming into Japan, dropped to $3.25 billion in March from more than double the $8.31 billion of a year ago and $8.27 billion in February.

Japan also reported that its current account for the 1987 financial year ended March 31 this year showed a surplus of $84.54 billion against $94.14 billion the previous year.

Trade in goods dropped to $94.28 billion from $101.65 billion in 1986.

For the fiscal year, exports grew 10.5% to $233.4 billion, but imports grew even faster, rising 26.9% to $139.1 billion. Both figures, measured on a balance-of-payments basis, were records.

The report did not provide a breakdown of where Japan’s imports were coming from. But other recent figures have shown that the biggest growth is from the newly industrialized countries of Hong Kong, Taiwan, South Korea and Singapore.

Growth of imports from the United States has been sluggish.

Toshiaki Kakimoto, chief economist for Sumitomo Bank Ltd., said monthly and annual trade surpluses should continue to shrink in this 1988 financial year. He sees trade in goods and services falling to $79 billion and the balance in just merchandise decreasing to $91 billion.

Japanese officials have been worried about the uncertainty and fluctuations of the dollar against the yen, which makes overseas investing risky, economists said.

“If the currency rates do not stabilize, Japanese investments abroad are likely to shrink,” Kakimoto said. “The trend for long-term investing overseas will depend on the dollar.”

Akahane said that Japanese are also hesitant to throw any large sums of money into U.S. bonds or securities, as they have in the past, on fears of American interest rates edging higher.

Higher interest rates often depress bond and equity markets, portending danger of possible losses.

However, economist Kaoru Koyano for Nomura Research Institute said that even though investments may slacken, “Japanese are not about to totally give up investing in U.S. bonds.

“Their worries over a possible free-fall for the dollar have lessened and the U.S. economy has been getting better,” he said. “Long-term investments will not shrink rapidly.”

In a separate announcement Monday, the Finance Ministry said that Japanese foreign stock sales were a record $830 million in March, surpassing $112 million in net sales in August, 1984.

Japanese were also net sellers of foreign stocks for the first time since November 1985 as they turned away from the sluggish New York market to the more active domestic market, a ministry official said.

In February Japanese investors bought a net $98 million worth of foreign equities.