Japan's Trade Surplus Narrows as Oil Boosts Imports (Update4)
Japan's Trade Surplus Narrows as Oil Boosts Imports
June 22 (Bloomberg) -- Japan's trade surplus had the biggest decline in more than three years in May as record oil prices depressed demand for exports and raised the value of fuel imports, sapping a recovery in the world's second-largest economy.
The surplus fell 68 percent to 297 billion yen ($2.7 billion) from a year earlier, the Ministry of Finance said in Tokyo today, the most since January 2002. The median forecast of 31 economists surveyed by Bloomberg News was for a decline to 499.1 billion yen. Exports rose 1.4 percent, the smallest gain since November 2003, and imports gained 18.6 percent.
Rising oil prices are leaving consumers in the U.S., Japan's largest overseas market, with less to spend on goods including digital cameras made by Olympus Corp. Oil costs are trimming profits at Japanese manufacturers, threatening to curb investment in machinery and equipment, which accounted a third of the nation's economic expansion in the first quarter of 2005.
``Export growth continues to be subdued, and we're not seeing evidence that that trend is going to be reversed,'' said Taro Saito, a senior economist at NLI Research Institute in Tokyo. ``Oil prices at record levels are also a concern because companies that can't pass on costs are going to see profitability suffer.''
Crude oil rose above $59 a barrel in New York for the first time on June 20. The cost of Dubai crude, a benchmark for Asian refiners, rose to a record $53.14 a barrel last week. Japan depends on overseas sources for almost all of its oil needs.
The yen fell from a 12-day high after the report. The yen was at 108.53 to the dollar at 12:04 p.m. in Tokyo from 108.16 late yesterday in New York.
Japan is dependent on demand from the U.S. and China, its two largest export markets, to maintain a recovery from its fourth recession since 1991, said economist Junichi Makino.
Key to Growth
``Exports are ultimately the key to Japan being able to enjoy sustainable growth,'' Makino, senior economist at Daiwa Research Institute in Tokyo, said before the report was released. ``With rising oil prices cooling global demand, we're not seeing any evidence that demand is going to recover.''
The median forecast of 15 economists surveyed by Bloomberg News was for exports to rise 6.8 percent and imports to gain 18.7 percent.
From a month earlier, the surplus shrank 1 percent to 690 billion yen, seasonally adjusted. Exports fell 0.1 percent, and imports were unchanged.
U.S. consumer confidence fell for a fifth straight month in May, the longest period of decline since 2002. The U.S. economy, the world's largest, expanded at a 3.5 percent annual pace in the first quarter, the second straight quarter growth has slowed. China's economy expanded 9.4 percent in the first quarter compared with 9.5 percent in the previous three months.
Falling Prices
Japan's economy expanded at a 4.9 percent annual pace in the first quarter as consumer and capital spending accelerated. Exports fell for the first time in more than three years, resulting in net exports -- the difference between exports and imports -- curbing growth for a third consecutive quarter.
Olympus, the world's fourth-largest seller of digital cameras, and other companies in Japan have been hit by falling prices and weaker-than-expected demand for electronics products, including flat-screen panels and digital cameras. Olympus, which reported its first annual loss in May, is firing workers to return to profit.
``We have to cut production costs to make up for the 15 percent to 20 percent price declines'' in digital cameras this year, Olympus President Tsuyoshi Kikukawa said in an interview this month. ``We're already losing money as it is.''
To contact the reporter on this story: Lily Nonomiya in Tokyo at lnonomiya@bloomberg.net
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