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Japan surplus up for first time in 13 months

TOKYO: The broadest measure of Japan's surplus in goods and services expanded in February for the first time in 13 months, helped by strong demand in booming overseas markets.

Many economists said the expansion in the current account surplus, reported on Tuesday, did not mark a change in the broader trend of a narrowing gap. But some suggested the surplus could continue to widen as overseas demand outstrips that of the still-tentative domestic recovery.

The surplus rose 33.3 percent from the same month last year to 1.47 trillion yen ($13.87 billion), the Ministry of Finance said. That was a bit above a consensus forecast of a 1.28 trillion yen surplus.

The increase was driven by a 19.4 percent expansion in the core trade surplus to 1.30 trillion yen, with an 11.4 percent rise in imports lagging an export gain of 13.9 percent.

SURPLUS RISE CALLED AS BLIP IN DOWNTREND

A ministry official said there was no change in the downward trend of Japan's surplus in goods and services, and most economists agreed.

The February rise was mainly due to temporary factors such as the extra day because of leap year, they said.

"We cannot say that Japan's surplus has turned to a rising trend based only on February data," said Atsuo Tominaga, an economist at the Industrial Bank of Japan. He said rising oil prices will increase the cost of imports, narrowing the surplus.

Nonetheless, the data provided more evidence of Japan's corporate vivacity on the back of growing industrial output and profits, while the comparatively weak imports show stubbornly limp personal consumption.

"With external demand remaining much stronger than domestic demand, this could foreshadow an end to the downtrend in the surplus," said economist Brian Rose at Warburg Dillon Read.

Japan's leaders hope export growth will help pull the economy free of its worst downturn in half a century.

But mindful of foreign criticism of its chronic trade imbalance, the government has pumped more than 100 trillion yen into the economy in recent years in an effort to spur a recovery led by domestic demand.

JAPAN PRESSED NOT TO EXPORT WAY TO RECOVERY

Just three days before Group of Seven finance ministers meet, Tokyo got a fresh reminder of foreign pressure for a domestic-led recovery, when U.S. Treasury Secretary Lawrence Summers said that Japan's upturn in growth was still not enough to rectify the global "imbalances" he has decried for months.

Japan's new Prime Minister Yoshiro Mori has repeatedly vowed to carry on the expansionary policies of his stricken predecessor, Keizo Obuchi, until a self-sustaining recovery takes hold. On Tuesday, he stressed to parliament the need to pass measures related to the budget for the new fiscal year.

Semiconductors and other information technology-related products led the February export gains. Customs-cleared data for February, released late last month, showed especially strong demand in the roaring U.S. economy and sturdily recovering Asia.

The currency market, which often bids the yen higher on rises in the trade surplus, showed no reaction early on Tuesday as traders were cautious of buying yen just before Saturday's G7 meeting.-Reuters