Surge in Microchip Sales in July Cited : Japan Trade Surplus Up 1st Time in 15 Months

Japan’s trade surplus rose in July for the first time in 15 months, helped by a hefty rise in semiconductor exports.

The sudden upturn in the surplus, reported Wednesday, to $7.18 billion from $6.94 billion in July last year caught many economists off guard. “We were surprised,” one said. “We had expected the overall trade figure to be down at least $1 billion.”

Exports of semiconductors and other electronics parts rose 51.3% from a year earlier, reflecting strong overseas demand for microchips, which are now in extremely short supply.

Although July’s surplus and exports were up, Japan’s trade focus in the month was not on the United States but on Europe and Southeast Asia, economists said.

The sensitive surplus with the United States narrowed to $4.49 billion in July from $4.79 billion a year earlier.

Exports to the United States grew only 4%, mainly because of sluggish shipments of cars due to inventory adjustments by American dealers, said senior economist James Vestal at Baring Securities (Japan).

“At the beginning of the summer, there was a huge pile-up of inventories,” Vestal said.

He also said Tokyo’s trade surplus with Washington should continue to decline. “We might get a couple of nasty months with imports going up, but the long-term trend is down.”

Several economists said especially significant was July’s slower growth of imports, which seems to indicate that the Japanese economy is cooling, at least in the short term. Imports, rising recently at a rate of 30% a month, grew only 23.1% to $15.95 billion. But exports continued their strong growth, gaining 16.2% to $23.13 billion.

“Imports depend much on the trend of the economy as a whole,” said Soichi Enkyo, an economist at Bank of Tokyo. “But we should have only short-term sluggishness as Japan’s economy itself is good and strong.

“The economy should soon return to its former brisk course,” he said, adding that the latest data was only a reaction to the intense economic activity during the previous quarters.

Enkyo predicts that Japan’s gross national product will grow more than 5% this financial year, which ends next March 31. Until a few months ago, most economists had put the figure at around 4%.

Enkyo also said it was important that Japan maintain policies that support domestic demand so the economy will continue to grow.