Japan Posts Unexpected Trade Surplus as Exports Surge

Japan reported an unexpected trade surplus for January, buoyed by a 50 percent surge in exports to China and a drop in oil imports.

The surplus was 4.4 billion yen ($36 million), compared with a deficit of 353.5 billion yen the same month a year earlier, the Ministry of Finance said in Tokyo today. Exports climbed 18.9 percent, twice as fast as economists expected.

Shipments to Europe rose at double the rate of those to the U.S., as the yen's fall to a record low against the euro benefited exporters. Expansion in Europe, China and the U.S., which together account for more than half of Japan's exports, will probably bolster the surplus in coming months, helping to extend the economy's longest postwar growth.

``This is a reflection of Japan's solid economy driven by exporters,'' said Norio Miyagawa, an economist at Shinko Research Institute in Tokyo. ``Exports will continue to lead the economy as overseas demand remains strong.''

The yen traded at 121.03 per dollar at 1:24 p.m. in Tokyo compared with 120.96 before the report was published. The median estimate of 33 economists surveyed by Bloomberg News was for a deficit of 140 billion yen.

Exports climbed at the fastest pace in eight months to the highest on record for January, led by automobiles, electronics and steel, the Finance Ministry said. Imports advanced 10.9 percent, more than the 7.6 percent expected.

Chinese New Year

``We expect exports to continue to grow moderately against a backdrop of solid growth in global economies,'' said Takehiro Sato, chief Japan economist for Morgan Stanley in Tokyo.

Shipments to China surged 50.8 percent, the fastest pace in almost four years, to 894 billion yen.

Two days of the Chinese Lunar New Year fell in January last year instead of February, cutting short the time exporters could ship goods to China and other countries that observe the holiday.

Overseas shipments last month were ``pushed up by the impact of the timing of the Chinese New Year,'' said Noriaki Haseyama, an economist at Dai-Ichi Life Research in Tokyo. ``Exports are solid and the decline in oil prices drove the surplus.''

The price of Dubai crude, a benchmark for Asian refiners, has dropped by a fifth in the past six months.

Exports to Europe climbed 12.9 percent to 898 billion yen, a record for January, helped by the yen's decline against the euro. Shipments to the U.S. rose 5.5 percent to 1.3 trillion yen.

Weak Yen

Japan's currency dropped to a record low of 159.13 against the euro today, on speculation the Bank of Japan will refrain from raising interest rates fast enough to discourage investors from selling the currency. Governor Toshihiko Fukui and his policy-making colleagues yesterday raised borrowing costs to 0.5 percent and said further increases would be gradual.

Japan's rates are the lowest among major economies, making the yen a popular currency to fund the purchase of higher- yielding assets. The yen is at its weakest since 1985 in trade- weighted terms, which reflect the value of the currency against those of its major trading partners, Bank of Japan figures show.

Economic expansion in the U.S. accelerated to an annual 3.5 percent pace in the fourth quarter, while growth in Europe almost doubled to 0.9 percent from the previous quarter. China's economy expanded 10.4 percent in the final three months of 2006 compared with the same period a year ago.

Toyota Motor Corp. automobiles and Canon Inc. printers helped exports drive more than a third of Japan's economic expansion in 2006.

Autos accounted for a fifth of export growth in January, today's report showed. Overseas shipments at Toyota, Japan's largest carmaker, rose 22.6 percent in December, according to the most recent figures.

Canon, the country's most profitable electronics and office equipment maker, forecasts net income to climb 8.7 percent to a record 495 billion yen this year.

Steel exports rose for a ninth straight month to 2.76 million metric tons, up 23 percent from a year earlier, according to customs data issued today. Shipments to China rose 63 percent.

source:www.bloomberg.com