Japan´s Feb trade surplus down 21.7 pct year-on-year; exports slow -
Wednesday, March 23, 2005 3:55:16 AM
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Japan's Feb trade surplus down 21.7 pct year-on-year; exports slow - UPDATE 2 (Adds market reaction, more analyst comments)
TOKYO (AFX) - Japan's merchandise trade fell again in February, government data show, raising concern over whether an expected pickup in domestic demand will compensate for a prolonged decline in external demand, long the major driver of economic growth. Both private economists and the government now predict the trade surplus will continue to drop due to double-digit growth in imports, the result of rising prices for oil, iron ore and other commodities and expanding "reverse imports", or products made by Japanese companies at plants overseas where wages are lower. Simultaneously, concern is growing that exports may increase only slowly, if at all, as China takes further action to curb growth and US interest rates rise
China and the US are Japan's largest export markets, with China surpassing the US last year to become Japan's largest trading partner
"The February trade data underpin the government's view of the economy that exports are slowing," said a Ministry of Finance (MoF) official, after the MoF reported the trade surplus plunged 21.7 pct last month from a year earlier to 1.09 bln yen, far below expectations
"And unlike last year, the trade surplus is not likely to increase rapidly in coming months, as crude oil prices appear to be remaining at a high level while the growth of exports is slowing," the MoF official said
Year-on-year, exports rose just 1.7 pct to 4.85 trln yen, while imports ballooned 11.3 pct to 3.75 trln yen, led by more costly imports of crude oil, steel and coking coal, used in making steel
Japanese steelmakers recently agreed to a 70 pct increase in the price of iron ore imported from Australia for the financial year starting next month. From the previous month, the trade surplus rose a seasonally adjusted 7.7 pct to 915.5 bln yen, but exports dropped. Exports fell 5.0 pct from January to 4.99 trln yen, while imports dropped 7.5 pct to 4.08 trln yen
In January, the seasonally-adjusted trade surplus fell 9.6 pct from December, while dropping by 59.9 pct from a year earlier
"Exports are likely to continue to be in a downturn at least until March 2006, as the global economy is slowing, including the US and China," said Mitsubishi Research Institute economist Katsuhiro Oshima. The trade data, announced 10 minutes before domestic stock trading began, weighed on equities but had little effect on either the yen or government bonds
At the lunch break on the Tokyo Stock Exchange, both the Nikkei 225 Stock Average and TOPIX index of all First Section shares were down 1.1 pct
The yen was trading at 105.46 to the US dollar and 137.94 to the euro, barely changed from 105.50 and 137.99, respectively, just ahead of the trade data. Until recently, Japan's trade surplus had been growing steadily on a year-on-year basis because of strong exports of electronic products -- such as mobile phones, flat-screen TVs and DVD players -- and of automobiles and auto products to the US, Europe and China
But in recent months exports of a number of major digital products have dropped
"Exports declined of chip and electronic parts, personal computers, and digital cameras, partly reflecting shifts of production sites for those products from Japan to other Asian countries," the MoF official said
Exports to Asia rose only 0.9 pct year-on-year to 2.25 trln yen, while imports from Asia surged 18.4 pct to 1.70 trln yen
Exports to China fell 2.2 pct, reflecting the transfer there of much production of items such as integrated circuits and automobiles, the MoF official said
Japanese exports are expected to continue to dwindle in the near term as growth in global IT demand is slowing, Daiwa Institute of Research senior economist Junichi Makino said
"As the silicon and crystal cycle has not yet started to give any clear signs of bottoming out, exports of these products, which account for nearly 70 pct of overall exports, are likely to continue to drop in the near term," Makino said
But surging commodity prices are meanwhile pushing up overall imports sharply
Japan's crude oil imports surged 20.4 pct by value in February from a year earlier, even as imports by volume declined to 19.2 mln kiloliters last month, from 20.7 mln kiloliters in January and 23.2 mln kiloliters in December
The customs-cleared average price of Dubai crude -- the Japanese benchmark -- in February was 39.9 usd per barrel, the highest in 12 months, the MoF official said
Exports to the US rose 6.4 pct year-on-year to 1.15 trln yen, because of an increase in shipments of automobiles and plasma display panels (PDPs)
"Exports to the US accounted for 1.4 percentage points of the increase of 1.7 pct in overall exports from the year-earlier level. The pace of increase in exports to the US surpassed the pace of increase in exports to Asia for the first time since February 2002," said the official
Exports to Europe fell 2.5 pct year-on-year, led by a reduction in exports of motorcycles, PDPs and mobile phone handsets
Imports from Europe fell 3.7 pct from a year earlier, led by decline in imports of certain categories of cars and in imports of pork, which had increased last year as consumers substituted pork for beef because of worries about mad cow disease |
