Japan’s Trade Surplus With U.S. Up 30% in Month : Commerce: Hikes in exports to Asian nations show inability to expand domestic demand.
A drive by Japanese corporations to export more to make up for a sluggish domestic economy pushed Japan’s trade surplus to $10.2 billion in February, a historic high for a single month, according to figures released Wednesday.
The announcement by the Ministry of Finance quickly raised fears of worsening trade friction with the United States. Although the figures showed by far a greater increase in Japan’s surplus with other Asian nations, the nearly 30% increase in the surplus with the United States comes at a time when presidential election politics and economic recession are spurring heated criticism of Japan’s trade policies.
The jump in the trade surplus will also add weight to widespread calls in Japan for the government to give the domestic economy a lift by cutting interest rates and boosting government spending.
“This is a major problem for us,” said Masaru Takagi, chief economist at Fuji Research Institute. “Japanese companies are pushing exports in order to cut their inventories and make up for slack domestic demand.”
Although Japan’s trade surplus has been increasing on a year-to-year basis for 14 consecutive months, government officials in the past have attributed the increase to the temporary effects of a rising yen. This time, however, the numbers show that Japan is not just pricing its exports higher in dollar terms, it is also exporting more in volume.
According to the figures, exports increased 12.2% in February, while the level of products imported into Japan fell 10.3% because domestic economic problems cut demand.
The surplus figure also surged because oil prices are much lower this year compared to last February, when the Persian Gulf War pushed up oil prices.
After several years of export-oriented growth in the early 1980s, Japan appeared to have successfully shifted to a domestic-oriented growth economy by cutting interest rates to spur investment and valuing the yen higher to cut the price of imports. Now it appears the moves, which resulted in a run-up in stock and land prices and a taste for such costly imports as diamonds, helicopters and German cars, may have been a temporary aberration.
“Japan is becoming export-oriented again,” Takagi said.
Economists expect the new trade figures to light a fire under lagging government efforts to boost the Japanese economy. With consumer confidence plunging and a recent Bank of Japan corporate survey showing a sharp decline in economic momentum, few believe that Japan will meet the 3.5% growth target Prime Minister Kiichi Miyazawa promised when he met with President Bush in Tokyo earlier this year.
Among the proposals to boost Japan’s economy is a massive increase in spending on roads, telecommunications systems and electric utility plants. Most economists also expect the Bank of Japan to cut its discount rate, the rate it charges banks to borrow money, by 0.5 percentage points to 4% by the end of the month.
Although American trade officials are likely to express the most vocal concern over the recent jump in Japan’s trade surplus, it is Asia that has been the biggest target of Japanese exports. Japan’s surplus with its Asian neighbors rose a sharp 80% in February.
Japan’s cement makers, for example, recently disclosed that they had agreed to deal with a problem of oversupply and falling prices in the domestic market by making a concerted effort to sell into the Asian market.
Japan’s February trade surplus with the United States, meanwhile, rose a significant 29.2% to $3.7 billion. The surplus with the European Community climbed 31.0% to $3.34 billion.
The lower increases with Europe and America may be an indication of the restraint Japanese manufacturers are showing in exports of such politically sensitive areas as semiconductors and automobiles.
Takagi suggested that another push to cut the value of the dollar against the yen, perhaps by as much as 30%, may be required to reduce Japan’s trade surplus.
