Imbalance Shrinks in U.S. but Swells in Europe : Japan’s Trade Surplus Jumps to $7.69 Billion

From Reuters

Japan’s huge trade surplus soared in October to $7.69 billion from $6.80 billion a year earlier, the Ministry of Finance reported Thursday.

While the Japanese surplus with the United States fell, exports to Europe and Southeast Asian countries such as South Korea and Taiwan were booming, and economists said new international tensions could arise from the failure to adjust lopsided trading patterns.

David Pike, an economist at UBS Phillips & Drew, said economists had been saying for months that the effort to cut the surplus had stalled and “now we can say it has reversed.”

Exports overall rose 13.2% to $23.38 billion, while imports rose a similar percentage to $15.70 billion.


Japan’s exports to the United States rose 7.9% to $8.34 billion over year-earlier levels, while imports from the U.S. jumped 27.7% to $3.51 billion from $2.75 billion in October, 1987. Japan’s surplus with the United States shrunk to $4.83 billion from the $4.98 billion reported in the year-earlier month.

But the picture was different with Japan’s other trading partners. Japan’s exports to Southeast Asia rose 25.2%, while imports grew only 6.1%. Overall, the Japanese trade surplus with Southeast Asia more than doubled to $1.81 billion from $856 million a year earlier.

Japanese exports to the European Community rose 16.3% to $3.85 billion, while imports were up 18.6% to $1.82 billion, giving Japan a $2.03-billion surplus against $1.78 billion last year.

Many analysts suggest that Europe and Southeast Asia, where Japanese auto exports rose 25.5% and 52%, respectively, in October on a year-to-year basis, may soon institute quotas and other non-tariff barriers.


“We’re going to see a different set of tensions,” Pike said. “It may be an increasing problem with Europe and Australia-Asia rather than the U.S. that the Japanese will have to cope with.”

The rise in the October Japanese surplus was the second consecutive gain for the Japanese trade account. Some analysts had pinned the blame for the September rise on lower imports because of a drop in crude oil prices.

“There are a number of people who argue that (the rise) is all temporary, but I disagree entirely,” said Adrian Tschoegl, an economist with SBCI Securities Asia.

“One factor alone is the upward valuation of the Korean won and the Taiwanese dollar, which makes yen exports cheaper to these countries and imports from them more expensive,” he said.

Japanese import growth has to rise 50% over the speed of export growth for the trade adjustment process to continue and that is not happening, said Kenneth Courtis, senior economist at DB Capital Markets Asia.