TOKYO, 23 September 2004 — Japan’s trade surplus in August fell sharply for the first decline in 14 months as higher costs for imported oil combined with weaker export growth, prompting concerns about the country’s economic outlook, the finance ministry said yesterday.
The surplus fell 26 percent from a year earlier to 576.1 billion yen ($5.2 billion), coming in far below consensus forecasts of economists polled by the Nihon Keizai economic daily for a surplus of 833.4 billion yen. Imports jumped 18.4 percent to 4.21 trillion yen, the second highest total ever, as crude oil hit $37.6 a barrel, up from $28.4 a year earlier, the ministry said. Exports rose 10.4 percent to 4.78 trillion yen. “Exports were strong but the rising crude oil values were very large,” said ministry official Hiroshi Hada.
The trend of declining growth in exports, following 14.3 percent in July, when the trade surplus totaled 1.14 trillion yen, and 19.4 percent in June, has some economists worried about Japan’s overall recovery. “The August data implies that exports will most likely gradually lose their ability to strongly lead economic growth in Japan as demand in China and the US is slowing down,” said Taro Saito, economist at the NLI Research Institute.
Okasan Research Institute economist Yuichiro Noda said exports were seen easing as US economic growth slowed — but the impact of high oil prices on imports was also seen declining in the months ahead. “I think the oil price may increase import values going forward but I think it is possible we’ve passed the peak,” Noda said. “I think September’s figures will show oil did not have as much of an impact as in August.”
Exports of scientific optical instruments such as semiconductor manufacturing equipment boosted by Asian demand rose 20 percent in August, while steel exports fed by Chinese demand rose 20.5 percent, the ministry said. Auto exports rose 4.7 percent from a year earlier.
However, crude oil imports surged 33.7 percent, adding some 100 billion yen to the import column, the ministry’s Hada said. Oil product imports rose 49.5 percent, while coal was up 47.7 percent. Japan’s trade surplus with Asia was flat at 538.3 billion yen as exports rose 13.9 percent to 2.40 trillion yen but imports increased 18.7 percent to 1.86 trillion yen.
Meanwhile, Japan’s top financial diplomat said that an upcoming meeting of Group of Seven finance officials and Chinese officials would likely discuss the value of the yuan, but not as a main topic.
“The issue will likely be discussed but not focused on. There might be a country that wants to focus on it, so it might be discussed, but I doubt all seven countries will focus on it,” Hiroshi Watanabe, vice finance minister for international affairs, told reporters.
China has been invited as a special guest to attend the Oct. 1 meeting of G-7 finance ministers and central bankers in Washington. Officials say it is part of an effort to draw Beijing into talks on global issues in recognition of its growing economic clout. It is now the world’s seventh-largest economy.
The meeting comes before US elections, meaning Washington may use it to demand that China loosen its grip on the yuan, pegged at around 8.28 per dollar.
