TOKYO, Nov 12 - The surplus in Japan's current account, the broadest measure of trade in goods and services, widened in September on the back of firm exports while industrial output for the same month was revised up. That will likely ensure that Japan showed growth, albeit modest, for the seventh straight quarter when July-September gross domestic product (GDP) data is released on Friday. Boosted by exports of semiconductors and automobiles, the current account surplus for September soared 37.6 percent from a year ago to 1.589 trillion yen ($14.6 billion), the Finance Ministry said on Wednesday. Economists in a poll had forecast that the surplus would widen by about 20 percent to a median 1.3777 trillion yen. "The data underscores the trend that exports continue to bolster the economy," said Shuji Shirota, an economist at Dresdner Kleinwort Wasserstein. The trade surplus rose 8.7 percent to 1.2944 trillion yen, with exports up 9.3 percent at 4.6312 trillion and imports up 9.6 percent at 3.3368 trillion, indicating steady domestic demand. For April-September, the first half of the financial year, the current account surplus widened by 20.0 percent to a record 8.352 trillion yen.
Exports also hit a record 25.8266 trillion yen, while imports totalled 19.7937 trillion yen, the third-highest on record. "Both exports and imports were robust," a ministry official told a briefing. "In addition, interest income rose as overseas assets increased." The current account surplus has been boosted by a shrinking services deficit as the number of Japanese travelling abroad has yet to return to last year's levels, after declining due to Asia's SARS virus outbreak and worries about war in Iraq. The deficit in the services account for April-September was the smallest since 1988. Separate data on Wednesday showed industrial production rose a revised 3.8 percent in September from a month earlier on a seasonally adjusted basis, after preliminary data showed a 3.0 percent rise. Markets showed little reaction to the data as it was largely within expectations. The stock market's benchmark Nikkei average <.N225> pared earlier gains by mid-afternoon, down 0.25 percent at 10,181.14 after falling sharply on Tuesday. The dollar was at 108.73/78 yen, flat from late U.S. levels.
BUDDING RECOVERY
A recovery in exports, particularly to Asia, has been the key to Japan's budding economic recovery. Figures released last month showed exports to China rose 42.4 percent in September to their highest level ever, although exports to the United States, Japan's largest single market, fell 7.3 percent for the ninth straight month of decline. The ministry official attributed the decline in exports to the U.S. partly to Japanese firms moving production abroad. Capital spending has also risen on the back of firm corporate profits and improving domestic demand, though companies are largely limiting spending to renewing old machinery. A survey of 26 economists produced a median forecast of a quarter-on-quarter rise of a real 0.3 percent in GDP for the three months to September 30. On an annualised basis, the poll found a median gain of 1.2 percent, compared with 3.9 percent real annualised gain in the April-June quarter. "We expect the data to confirm that the economy itself is not bad," said Naoki Murakami, a senior economist at Goldman Sachs. One worry is the impact of the yen's recent surge against the dollar, which the government has attempted to curb by selling huge amounts of the Japanese currency on the foreign exchange market this year. Japan spent a record quarterly amount on currency intervention in July-September, selling 7.5512 trillion yen, equivalent to $69.43 billion at Wednesday's exchange rate. "The trade surplus will continue to expand mainly led by exports to Asia on the back of a global economic recovery," Mizuho Research Institute said in a research note. "The risks are a sudden surge in the yen and any change in the U.S. economy."//www.reuetrs.com