Japan’s Trade Surplus Jumps More Than 200%

TOKYO — Japan’s contentious trade surplus showed a dramatic rise for the second month in a row in May, giving Prime Minister Ryutaro Hashimoto some unwelcome news to take to this weekend’s summit of G7 nations.

Japan’s global trade surplus, often the source of bitter rows with the United States, jumped more than 200% in May from a year earlier to $6.53 billion, the Finance Ministry said today.

The surplus with the United States, which has already been grumbling about the growing trade imbalance between the two countries, surged 93% in May from a year earlier to $2.85 billion.

“We need to continue to keep careful watch to see whether there has been a change in the declining trend of the trade surplus,” a senior Finance Ministry official told reporters.

Until recently, the ministry had steadfastly maintained that the trade surplus was still basically on a downward path, although it rose in some months earlier this year on a year-over-year basis.

May’s surge reflects a slowdown in imports after a rise in Japan’s sales tax in April and the effects of a weaker yen.

The unexpectedly large rise in the surplus--much of it due to auto exports--sent Japanese stocks falling today, led by auto makers such as Honda Motor Co. and Toyota Motor Corp., on concern that the news will hurt exports by triggering protectionist sentiment overseas and boosting the yen.

“While a surplus was anticipated, the [size] was much larger than expected,” said Masayasu Sugawara, a strategist at Marusan Securities Co.

The dollar edged down against the yen as currency markets speculated that Japanese and U.S. governments would favor a higher yen to rectify the trade imbalance. The dollar briefly fell below 113 yen after hovering above that figure in early Tokyo trading.

A strong yen makes Japanese goods more expensive in global markets, thus hurting their competitive edge and curbing exports from Japan.

“It’s the eighth straight month it’s up with the U.S. I’m sure the U.S. will bring it up at the G7 meeting, but I don’t think . . . they are likely to make anything dramatic out of it,” said Michael Martnett, chief economist at Merrill Lynch Japan.

Hashimoto is due to meet President Clinton on Thursday before the Group of Seven leading industrialized nations meet Friday through Sunday in Denver.

The summit brings together the leaders, finance ministers and foreign ministers of Britain, Canada, France, Germany, Italy, Japan and the United States, who will be joined by Russian President Boris Yeltsin.

U.S. Treasury Secretary Robert Rubin said Monday that the world has an interest in seeing Japan achieve a strong economic recovery led by domestic demand, without running up huge trade surpluses.

A U.S. official in Tokyo, reacting to today’s figures, said the data reinforce the concern that the surplus may have shifted back to a rising trend.

“We still can’t make any final judgment based on two or three months or even a quarter, but the numbers do reinforce our concern that the surplus appears to be climbing again,” the official said.

Economists said May’s surge was partly due to slower consumption after an April 1 increase in Japan’s sales tax, which has put the brakes on import growth.

They also said the overall surplus is unlikely to keep rising at a rapid pace.

“The surplus will not continue to rise at the rapid pace seen in May, partly because companies are cautious about increasing production due to uncertainties about the economy,” said Kenichi Futakami, an economist at Daiwa Bank Research Institute.

He added that car producers such as Toyota and Nissan may try to restrain exports in a bid to avoid trade friction.