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To: Alex who wrote (49415)	2/21/2000 6:22:00 PM
From: goldsnow	Respond to of 116762

High Oil Prices Barely Affect Japan Monday, 21 February 2000 T O K Y O (AP) TAKAYUKI SUNAMURA'S gas station is getting squeezed. With the doubling of global crude oil prices over the last year, his supplier is charging him more for gasoline, but customers refuse to pay more at the pump and often go searching for lower prices that are available in the city. It's a sign of how petroleum isn't as critical a factor for the Japanese economy as it once was, even though Japan still imports all its oil and is only just beginning to recover from the Asian economic crisis. The last time oil prices skyrocketed - in the mid-1970s - the government ordered neon signs turned off at night, gas stations to close on Sundays and holidays, and the partly state-owned NHK TV to cut its hours. Resource-poor Japan, the world's second largest economy, sank into recession. Now, aside from shrinking profits at some filling stations, where gas typically costs the equivalent of $3.28 a gallon, there are few signs of economic pain. "Japan is becoming less of a manufacturing-driven economy and more of a service-type of economy, so the price of oil plays less of a role," said Matthew Poggi, an economist at Lehman Brothers (Japan) Ltd. The story is similar in many Asian countries. The reasons range from shifts in manufacturing to less energy-dependent businesses to expanding uses of other energy sources. "Oil is a lot less important these days," said Scott Weaver, deputy head of research at ING Barings Securities in Taiwan. Japan has worked hard since the '70s to reduce its reliance on oil. Crude oil prices started rising last February when the Organization of Petroleum Exporting Countries cut production to reverse a drop in prices. Since then, the price of oil has soared from $10 to $25 a barrel, the highest in nine years, the Agency of Natural Resources and Energy said. But while Japan still imports almost all of the oil that its factories and households consume, few worry anymore about the impact of oil prices on the economy. Haruhiko Kuroda, Japan's vice finance minister for international affairs, told reporters Thursday that higher oil prices won't hinder the nation's economic recovery. The government expects the economy to grow 0.6 percent in the fiscal year ending March 31, following two straight years of contraction. Japan has greatly reduced its dependence on oil imports, Kuroda said. More than a third of Japan's electricity is now supplied by nuclear reactors, compared with just 6.5 percent during the 1970s oil crisis, the energy agency said. Meanwhile, cleaner industries such as software development and engineering services are growing relative to oil-guzzling manufacturing industries like steel and autos. The reduced dependence on oil lets Kuroda and his colleagues at the Finance Ministry worry about other things, such as the yen's recent rise against the U.S. dollar. "The level of the exchange rate is more important than the level of one particular commodity," said Lehman's Poggi. The Finance Ministry and the Bank of Japan in recent months have intervened in the currency market, selling yen for dollars to weaken the Japanese currency. They say a strong yen could derail Japan's nascent economic recovery because it makes Japanese products more expensive in overseas markets. Oil, on the other hand, has gone from newspaper headlines to a trade statistic. Japan's current account surplus - the nation's broadest measure of trade - shrank in 1999 for the first time in three years in part because Japan had to pay more for oil imports. The surplus has long been a source of friction with the United States and other trading partners. Back at street level, though, the service stations are struggling. "We're trying not to raise prices," Sunamura said. "If we do, they'll just go somewhere else."