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Japan April Export Growth Accelerates; Surplus Falls (Update6)

Japan April Export Growth Accelerates; Surplus Falls

May 25 (Bloomberg) -- Japan's exports rose at the fastest pace in four months in April, led by autos and steel, suggesting that overseas demand will support a recovery in the world's second- largest economy.

Exports rose 7.8 percent from a year earlier, after gaining 6.1 percent in March, the Ministry of Finance said in a report today in Tokyo. Imports rose 12.7 percent as oil prices gained, reducing the trade surplus by 10.4 percent to 962.8 billion yen ($8.95 billion). The median forecast of 24 economists surveyed by Bloomberg News was for the surplus to fall 18 percent.

Manufacturers including Kenwood Corp., a maker of car navigation systems, say faster-than-expected economic growth in China and the U.S. will boost sales this year. A rebound in exports, which fell for the first time in more than three years last quarter, may support a recovery from last year's recession.

``We can expect exports to be stronger this quarter,'' said Azusa Kato, an economist at BNP Paribas Securities Japan Ltd., who came the closest to predicting the trade surplus. ``The U.S. has emerged from its soft patch and Asian demand is regaining ground.''

The yen strengthened to 107.32 to the dollar at 2:14 p.m. in Tokyo from 107.64 late yesterday in New York. Stocks fell on concern rising costs of imported oil and raw materials will erode earnings. The Nikkei 225 Stock Average fell 1.3 percent to 10,994.25.

China, U.S.

The U.S. economy probably expanded at an annual 3.6 percent rate in the first quarter, more than initially estimated by the government, economists said. China's economy expanded 9.4 percent from a year earlier in the first quarter, barely slowing from the 9.5 percent pace of the previous three months. China is Japan's second-largest overseas market after the U.S.

``I'm not too worried about the economic outlook this year,'' Haruo Kawahara, president of Kenwood, said on May 20. ``Our earnings closely follow the auto sector, and that's in a growth trend at the moment.''

Kenwood said on May 20 that it expects net income to rise 24 percent in the fiscal year started April 1. Profit for the three months ended March 31 fell 34 percent as prices of auto electronics fell.

Japan's exports had been expected to rise 6.8 percent, and imports to gain 13 percent, according to the median forecast of 15 economists surveyed by Bloomberg. Exports to the European Union rose 7.7 percent, led by automobiles, the first gain in four months, the government said.

Oil Prices

The average cost of crude oil in Dubai, an Asian benchmark, was $47.10 per barrel in April, up 52 percent from $30.98 the same month a year earlier. Imports of oil and related products accounted for more than a third of the gain in imports, today's report showed.

Slower exports, which accounted for a third of Japan's economic expansion in 2004, left the economy reliant on spending by Japanese households and companies in the first quarter of 2005.

Japan's economy expanded at an annual 5.3 percent pace in the first quarter, accelerating from a 0.1 percent pace, as consumer spending rose for the first quarter in three.

Net exports, or the difference between exports and imports, shaved 0.1 percentage point from first-quarter growth after overseas sales fell.

Memory chipmaker Elpida Memory Inc. in February said excess inventory had been depleted and the company would increase sales and profit in fiscal 2005. It said customers bought fewer chips last year amid an inventory build up of mobile phones, digital cameras and other consumer electronics.

Capital Spending

Companies are planning to expand as they anticipate stronger overseas demand. Sharp Corp., the world's biggest maker of liquid- crystal display televisions, said on April 26 it will raise spending 3.3 percent to 220 billion yen this business year.

Capital spending is expected to fuel profits at machinery makers including Tokyo Electron, the world's second-largest supplier of semiconductor-making equipment.

Tokyo Electron in February forecast net income in the year ended March 31 would rise sevenfold to 60 billion yen and sales would gain 17 percent to 620 billion yen. The company expects spending by chipmakers to recover this year.

``Based on the orders in the first three months of the year, which were relatively good, the capital expenditure mood among the makers is fairly positive,'' said Terry Higashi, chairman of Tokyo Electron, said this month.

The trade surplus fell 20.5 percent from March, seasonally year started April 1, more than the 100 billion yen it initially adjusted, to 712.2 billion yen, today's report said. Exports rose 1.1 percent from March, and imports rose 5.6 percent.

To contact the reporter on this story:
Lily Nonomiya in Tokyo at [e-mail]


LINK: http://www.bloomberg.com/apps/news?pid=10000080&refer=asia&sid=aex0AhXbWzBc