Japan’s Trade Surplus Takes Record Drop

Japan’s trade surplus plunged 39.4% to $4.66 billion in October from $7.68 billion a year earlier, the largest fall ever recorded, the Finance Ministry said Monday.

Booming demand for imports, dramatically weaker exports and a strong dollar were behind the data, economists said. They expected the total 1989 surplus to narrow markedly from last year.

“We should see a significant decline this year,” said Soichi Enkyo, an economist at Bank of Tokyo.

“These are made-to-order numbers, and they get Japan off the hook for the GATT meeting this week,” said Ken Courtis, senior economist at DB Capital Markets (Asia).

A meeting of the General Agreement on Tariffs and Trade starts Wednesday in Tokyo. The world trade body will discuss disputes including those arising from Japan’s large trade surplus.

International Trade and Industry Minister Hikaru Matsunaga was quoted as saying Monday that the surplus would narrow to about $84 billion in 1989 from $95 billion last year.

“It’s not so much that exports are collapsing, but that imports are up,” Courtis said.

Imports in October surged 16.3% from a year earlier to $18.33 billion. Economists said exports sank to their lowest level since June, 1985, shrinking 1.9% to $22.99 billion.

Strong Japanese domestic demand for wood, timber, pulp, paper, natural gas and other raw materials helped boost imports, analysts said. Crude oil imports surged.

“Strong Japanese domestic demand is helping import growth,” said Chiharu Sumita, economist at investment house UBS Phillips & Drew International.

Analysts noted a 30.6% rise in imports from the European Community in October.