Japan's surplus off as U.S. trade drops

By staff and wire reports

TOKYO, Japan -- Japan's trade surplus fell 16.3 percent in November, the 17th month in a row it has fallen.

Exports were down 9.1 percent over the previous year, to 3.89 trillion yen. But both exports and imports have been falling in Japan, which is suffering through recession.

Shipments to the United States were off even more, down 10.1 percent. That led to a 5.0 percent drop in Japan's surplus with the U.S., its largest trading partner.

Export-oriented Japan used to produce a hefty surplus, and it's rare that Japan runs a trade deficit with any country.

For November, imports sagged 8.0 percent to 3.39 trillion yen. They had been holding up until recently, as Japanese consumers and companies switched to cheaper Asian goods and manufacturing sites.

The overall surplus fell to 498.3 billion yen ($3.89 billion) on an unadjusted basis, the finance ministry said.

Declines show signs of moderating

J.P. Morgan economist Ryo Hino said the declines were in line with expectations. On a seasonally adjusted basis, exports were up for a second month, which Hino said shows that the decline is moderating.

While the falloff in information-technology exports has slowed, it is too early to assume they have bottomed out, Hino said.

Exports, particularly to the United States, are being propped up by strong sales of transportation machinery, mainly cars. Japanese carmakers have been marketing their vehicles aggressively in America.

Hino said exports warrant watching over the next few months, to see if they can turn around.

Draft budget out

The Finance Ministry on Thursday also released its draft budget for the fiscal 2003 year.

For the second straight year, the government is cutting spending, with the draft showing a 1.7 percent drop in total spending, to 81.2 trillion yen ($633.6 billion).

Economics Minister Heizo Takenaka noted that the spending cut is a "slight decrease," in line with the deflation plaguing Japan.

He said the budget cut had to be considered with the second supplementary budget of 2.5 trillion yen for this fiscal year, which the cabinet also approved Thursday.

The fiscal 2003 budget also incorporates Prime Minister Junichiro Koizumi's cap on government bond issuance, at 30 trillion yen.

But Finance Minister Masajuro Shiokawa dealt that much-vaunted reform - one of Koizumi's most-easily understandable - a blow.

He said he wasn't sure whether the cap could hold for fiscal 2003.

"We have to watch the situation," he said, adding that he feels the government still should not easily resort to government bond issuance to spend its way out of trouble.

That sparked a weakening in the yen, which is again setting a three-year weak level against the U.S. dollar, approaching 130 to the dollar.