No. 30 — August 4, 2000

 

Weekly Review

JAPAN'S TRADE SURPLUS DIPPED AGAIN IN SPRING
--- by Douglas Ostrom

For the fifth straight quarter, Japan's customs-clearance trade surplus declined on a year-to-year basis in the April-June period (see Table 1). Like its predecessors, the drop was measly — only 3.2 percent — suggesting the need for caution in drawing inferences from the recent trend. In fact, the dip in the spring was entirely artificial. A high proportion of both Japan's exports and imports is denominated in dollars, yet the nation's trade figures are reported in yen. The Japanese currency, although fairly stable in recent months in the range of ¥105 to ¥110 to the dollar and averaging ¥106.6=$1.00 for the April-June quarter, was far stronger than a year ago when the comparable number was ¥120=$1.00. A more expensive yen implies that a constant value of dollar-denominated trade translates into fewer yen than otherwise. Since Japan's exports exceed its imports by a wide margin, a high-flying yen tends to depress exports more than imports, thereby trimming the surplus even in the absence of any change in export and import volume or pricing.
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Table 1: Japan's Total Trade, 1995-99

(in billions of yen)

Exports
(f.o.b.)

Change Over Year-Earlier Period

Imports
(c.i.f.)

Change Over Year-Earlier Period

Trade Balance

1995

¥41,531

2.6%

¥31,549

12.3%

¥9,982

1996

44,731

7.7

37,993

20.4

6,738

1997

50,938

13.9

40,956

7.8

9,982

1998

50,645

-0.6

36,654

-10.5

13,991

1999

47,557

-6.1

35,204

-4.0

12,353

1995:

I

10,224

2.5

7,533

13.3

2,691

II

9,862

0.1

7,357

7.5

2,505

III

10,269

1.3

7,808

9.5

2,461

IV

11,174

6.1

8,850

18.3

2,324

1996:

I

10,763

5.3

8,937

18.6

1,825

II

10,714

8.6

9,438

28.3

1,276

III

11,155

8.6

9,530

22.0

1,625

IV

12,100

8.3

10,089

14.0

2,011

1997:

I

12,072

12.2

10,616

18.8

1,456

II

12,649

18.1

10,151

7.6

2,499

III

12,641

13.3

10,019

5.1

2,622

IV

13,576

12.2

10,171

0.8

3,405

1998:

I

12,544

3.9

9,638

-9.2

2,906

II

12,735

0.7

9,078

-10.6

3,657

III

13,173

4.2

9,425

-5.9

3,748

IV

12,193

-10.2

8,523

-16.2

3,670

1999:

I

11,351

-9.5

8,344

-13.3

3,007

II

11,681

-8.3

8,631

-5.0

3,050

III

12,230

-7.2

8,894

-5.7

3,336

IV

12,299

0.8

9,343

9.6

2,956

2000:

I

12,350

8.8

9,541

14.1

2,809

II (p)

12,722

9.0

9,801

13.3

2,922

Data on the physical quantity of trade tell a different story. Compared with a year earlier, worldwide export volume surged 13.3 percent in the spring, a faster pace than price-adjusted gross domestic product growth in virtually all of Japan's major trading partners. As a consequence, exporters expanded their positions in most of their main markets. At 12.5 percent, the jump in import volume was almost as impressive, suggesting that foreign producers similarly gained ground in Japan, where preliminary data indicate that industrial production increased 7 percent in the second quarter from the spring of 1999.

Trade with the United States — Japan's top market and supplier as well as one of the world's fastest-growing economies — was different still. As measured in yen, the already-huge transpacific surplus grew 5 percent as shipments in both directions rebounded modestly from their spring 1999 contraction (see Table 2). Data on bilateral trade volume, a statistical series not widely available in the past, showed a year-on-year export expansion of 7.3 percent, more than double the import increase of 3.3 percent. These figures lead to the tentative finding that Japanese manufacturers gained share in the United States, while American competitors may have lost some of their foothold in Japan to the extent that that standing is secured through trade.
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Table 2: Japan's Trade with the United States, 1995-00

(in billions of yen)

Exports (f.o.b.)

Change Over Year-Earlier Period

Imports (c.i.f.)

Change Over Year-Earlier Period

Trade Balance

1995

¥11,333

-5.8%

¥7,076

10.1%

¥4,257

1996

12,177

7.4

8,631

22.0

3,546

1997

14,169

16.4

9,149

6.0

5,020

1998

15,470

9.2

8,778

-4.1

6,692

1999

14,605

-5.6

7,640

-13.0

6,965

1995:

I

2,938

-1.6

1,662

0.7

1,276

II

2,691

-6.9

1,665

2.4

1,026

III

2,770

-9.7

1,735

9.5

1,035

IV

2,934

-5.0

2,015

28.8

919

1996:

I

2,959

0.7

2,090

25.8

869

II

2,859

6.2

2,226

33.7

633

III

3,081

11.2

2,154

24.1

927

IV

3,279

11.7

2,161

7.3

1,118

1997:

I

3,456

16.8

2,374

13.6

1,081

II

3,462

21.1

2,312

3.9

1,150

III

3,494

13.4

2,221

3.1

1,273

IV

3,757

14.6

2,242

3.7

1,515

1998:

I

3,830

10.8

2,353

-0.9

1,477

II

3,858

11.4

2,265

-2.0

1,593

III

4,087

17.0

2,259

1.7

1,828

IV

3,695

-1.7

1,901

-15.2

1,794

1999:

I

3,517

-8.2

2,070

-12.1

1,447

II

3,652

-5.3

1,906

-5.8

1,746

III

3,801

-7.0

1,787

-20.9

2,014

IV

3,635

-1.7

1,877

-1.3

1,757

2000:

I

3,685

4.8

1,833

-11.4

1,852

II (p)

3,766

3.1

1,934

1.5

1,832

The aggregate trade statistics also obscure dramatic changes in certain product categories, both bilaterally and globally. The highly contentious matter of steel provides an obvious example. Japan's U.S.-bound steel exports have been the subject of suits and countersuits over dumping in the wake of a 1998 surge in shipments (see JEI Report No. 10B, March 9, 2000). In fact, one trade veteran has called steel one of "the last soldiers still standing" from this country's protracted trade disputes with competitors in the 1980s and earlier.

The latest trade figures suggest that, at least bilaterally, steel has continued to shrink in importance this year. It now represents a mere 1 percent of Japan's exports to the United States, totaling ¥75.5 billion ($686.4 million at ¥110=$1.00) in the first six months of 2000, or 18.2 percent less than in the same period of 1999, when a cutback already was underway.

The American steel industry and its friends on Capitol Hill might argue that the currently modest level of Japanese steel exports reflects the success of their campaign to get Washington to crack down on unfairly priced made-in-Japan products through a raft of dumping complaints and other actions. Japanese officials counter that what really has happened is that steel shipments have been redirected in response to the deluge of U.S. antidumping cases. In this view, growing global demand boosts Japan's steel exports — if not to the United States, then to other nations.

The customs-clearance trade data are consistent with this interpretation. Worldwide, steel constituted 3.1 percent of Japan's exports through mid-2000, three times the share of shipments to the United States. Even in yen terms, global steel exports expanded 8 percent in the first six months of this year in contrast to the large drop in U.S. sales. Perhaps most significantly, international tonnage surged 14.8 percent, a rate much higher than the increase in global GDP and consistent with the argument that some portion of the hike in Japanese exports to third countries is replacing the supply previously diverted here.

The January-June trade figures also provide evidence for another predicted impact of antidumping duties: a wide divergence of prices from the world level in the country imposing these penalty tariffs. In fact, steelmakers' receipts per ton of steel (in yen) rose 4.9 percent for shipments to the United States but dropped 6.8 percent globally in the first half of 2000. The implication of this gap is that American steel users may be increasingly disadvantaged compared with counterparts in other nations that are able to buy Japanese-made steel on more favorable terms.

More broadly, the steel example is not inconsistent with the impression drawn from Japan's latest quarterly trade data of signs of life in the world's second-largest economy. Reflecting healthier economies in Europe and Asia and continued strength in North America, exports are robust, feeding domestic demand. But imports also are up, perhaps signaling expanding demand outside the foreign sector as well. The result is relatively little change in Japan's yawning international trade imbalance but additional evidence that the economy is, in fact, recovering.

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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