POG $317.70, down $2.20 presently
Japan surplus soars amid trade friction fears
July 9/97
TOKYO, July 9 (Reuter) - The surplus in Japan's current account -- the broadest measure of goods
and services trade -- climbed steeply in May for a second straight month against a background of
fears of renewed trade friction.
The Finance Ministry said on Wednesday that the current account surplus, often a source of bitter
rows with the United States, jumped 154.9 percent in May to 906.8 billion yen ($8.02 billion at
Wednesday's rate of around 113 yen to the dollar).
The surplus in merchandise trade alone surged 118.6 percent from a year earlier to 927.9 billion
($8.21 billion).
The surge had been widely anticipated as Japan's customs-cleared trade surplus for May, which
was announced in June, showed a dramatic year-on-year increase of more than 200 percent. The
trade surplus within the current account category, calculated on different basis, differs slightly from
the customs-cleared trade surplus.
"Due to structural changes in the Japanese economy, the surplus in goods and services is unlikely
to increase significantly as a trend, although there may be fluctuations in the short term," a Finance
Ministry official told reporters.
But the surge in the surplus looks like bad news for Prime Minister Ryutaro Hashimoto, who last
month assured U.S. and European leaders that Japan's external surplus is not expected to rise
substantially over the medium term.
On Tuesday, Toyota Motor Corp chairman Shoichiro Toyoda said at a U.S.-Japan business
conference in San Francisco that bilateral relations were basically in good shape but recent growth
in Japan's trade surplus had "given rise to voices of concern."
On the foreign exchange market, news of the figures sent the dollar down against the yen as
currency players surmised that the Japanese and U.S. governments would have to reluctantly push
up the value of the yen as the only way to rectify the external imbalance.
The dollar was around 112.60 yen in mid-morning after opening at around 113 yen.
Influential Finance Ministry official Eisuke Sakakibara told Reuters on Tuesday that Japan and the
United States have no intention of using exchange rates as a tool to correct the external trade
imbalance.
A strong yen makes Japanese goods more expensive in global markets, thus hurting their
competitive edge and curbing exports from Japan.
The ministry official and economists shared the view that the surge in the surplus in May was due
to a hefty increase in exports, especially of cars to the United States, and a smaller increase in
imports caused by sluggish consumption.
In May, overall exports grew 20.2 percent from a year earlier, while imports rose 5.8 percent.
Japan raised its sales tax to five percent from three percent on April 1, which dampened
consumption in April and May, causing sluggish imports and encouraging manufacturers to boost
exports to make up for the drop in domestic consumption.
In May, car exports rose 43 percent from a year earlier, while exports of computers rose 24
percent and those of steel increased 32 percent.
Economists see growth in the surplus moderating later this year due to a stronger yen against the
dollar and prospects of slower U.S. growth, which could slow Japan's exports.
Daiwa Bank Research Institute economist Kenichiro Futakami said: "The surplus is unlikely to
keep up its very sharp growth pace in the coming months due to a stronger yen. For the whole of
fiscal 1997 (ending next March 31), the current account surplus will likely show an increase of
about 40 percent."
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