Tokyo, March 12 (Bloomberg) -- Japan's current account surplus narrowed in January as exports fell, putting more pressure on Prime Minister Junichiro Koizumi to avoid a fourth recession since 1991. The surplus fell a seasonally adjusted 3.9 percent to 995.6 billion yen ($8.5 billion) from a revised 1.04 trillion yen in December, the Ministry of Finance said. Economists had expected the surplus to fall to 940 billion yen, according to the median of 15 forecasts in a Bloomberg news survey. The prospect of war in Iraq has curbed global demand and weakened the dollar, hurting overseas sales of companies such as Mitsui Chemicals Inc. A two-month decline in exports and plunging stock prices may prompt Koizumi's government to step up spending to boost the world's No. 2 economy.
``Export growth is slowing, and with the possibility of a war in Iraq it may decelerate further,'' said Toshiyuki Hara, a senior market economist at Mizuho Securities Co. ``The government needs to adopt policies that would give incentives'' for companies and consumers to spend. Mitsui Chemicals, Asia's third-biggest maker of resin used to make plastic bottles, yesterday said it expected to fall short of its net profit forecast of 28 billion yen for the business year ending this month because of falling sales and rising material costs. The yen's 9.5 percent rise against the dollar in the past year has squeezed profits at Japanese exporters such as Canon Inc. Finance Minister Masajuro Shiokawa yesterday said the government was prepared to sell yen to weaken the currency and protect exports.
Yen, Shares
The yen was at 117.44 to the dollar at 1:52 p.m. in Tokyo, compared with 117.14 yen late yesterday in New York. Japanese stocks rose, with the Nikkei 225 Stock Average climbing from a 20-year low, as some investors expected the government to step up spending and ask the central bank to buy more shares from banks before they close their books on March 31. The Nikkei added 1.4 percent to 7968.59, its first gain in seven sessions, at 1:52 p.m. in Tokyo. Japanese bonds rose, sending 10-year yields to a record low on expectations a war against Iraq will slow the global economy, boosting demand for the safety of bonds. The No. 247 bond, which carries a 0.8 percent coupon and matures in 2013, rose 0.141 to 100.793 as of 11:28 a.m. in Tokyo. Its yield fell 1.5 basis points to 0.715 percent. A basis point is 0.01 percentage point. From a year earlier, the current account surplus fell 37.6 percent to 427.1 billion yen. The current account is the broadest measure of trade because it includes investment and services.
Oil Prices
Exports fell 3.2 percent in January from December, seasonally adjusted. Imports fell 0.6 percent in January, less than the 3.8 percent drop in December. From a year earlier, imports rose 12.1 percent in January. Imports are likely to rise as oil prices are driven up by prospects of a conflict in Persian Gulf. ``Imports are gaining from rising oil prices, not because the domestic economy is strong,'' said Kazutaka Kirishima, senior economist at Sumitomo-Life Research. ``That's not good news as it will shrink the surplus.'' Crude oil in Dubai, which Japanese refiners use as a benchmark for pricing, has risen 15 percent this year to close at $30.16 a barrel yesterday. Crude oil in New York rose to a record closing-high of $37.78 a barrel on Monday. Japan is counting on exports to propel growth as rising unemployment and falling wages hurt domestic demand, which accounts for half the economy. Japan's unemployment rose to match a record 5.5 percent in January as companies such as retailer Tokyu Department Store Co. cut jobs. //www.quote.bloomberg.com