TOKYO, Nov 20 - Japan's trade surplus rose in October for the fourth straight month on the back of firm exports, which are expected to add further fuel to the country's budding economic recovery. Exports to Asia, namely the booming Chinese market, hit record levels on brisk demand for high-tech products, government data showed on Thursday. Japan's customs-cleared trade surplus jumped 20.4 percent from a year earlier to 1.0739 trillion yen ($9.83 billion), Finance Ministry data showed, exceeding economists' consensus forecast of 950.0 billion yen. The surplus exceeded one trillion yen for the second straight month for the first time since June-July 2000. "The surplus is at fairly high levels compared with the past two to three years," a ministry official told a briefing. Exports moved up 5.4 percent from a year earlier, although they fell 2.8 percent from a month earlier on a seasonally adjusted basis. Imports increased 1.8 percent year-on-year but fell 4.9 percent month-on-month.
On the whole, economists said the figures underscored growing optimism that a recovery in exports will help Japan extend its seven-quarter-long economic expansion. "Strong exports for October followed stronger-than-expected industrial production in September, mainly in the electronics parts sector," said Shigeru Saito, general manager of investment research at Daiwa Asset Management. "That suggests the trend is being maintained with the help of growing exports to Asia and that Japan's economy is being driven firmly by its two main engines --- exports and capital spending." July-September gross domestic product (GDP) figures released last Friday showed that external demand accounted for 0.2 percentage point of 0.6 percent economic growth in that period. Much of the domestic demand came from capital spending, which in turn was spurred by demand for manufacturers' exports.
BOOMING ASIA
Exports to China jumped 27.8 percent from a year earlier, offsetting a 6.2 percent drop in shipments to the United States, which is still Japan's biggest trade partner. Although the 10th straight month of decline in U.S.-bound exports appeared worrying, Azusa Kato, an economist at BNP Paribas in Tokyo, said the outlook was brightening. "The underlying recovery trend in exports is continuing. Although exports were down 2.8 percent from a month earlier, this comes after a big jump in September and does not change our view on the trend," she said. Peter Morgan, chief economist at HSBC Securities Japan, agreed with the optimistic view, noting that exports on a volume basis rose 7.3 percent. "There are growing signs that exports are bouncing back in the second half of this year," he said. Imports increased for the 14th straight month on the back of modest domestic demand, but the rise of 1.8 percent was the smallest in a year. That was partly due to the yen's appreciation causing a decline of 5.4 percent in imports of crude oil by value, although the volume of such imports had risen, the ministry said. Led by shipments to China, exports to Asia amounted to a record 2.3306 trillion yen in October on brisk demand for liquid crystal display panels, DVD lenses and mobile phone parts. Exports to Asia have grown for 20 straight months. Imports from Asia also hit a record 1.8045 trillion yen. The budding recovery is good news for Prime Minister Junichiro Koizumi, who was reelected to the top job on Wednesday after the ruling coalition retained its majority, although reduced, in a November 9 Lower House election. The government will release its latest assessment of the economy later on Thursday, and is widely expected to upgrade its view for the first time in two months on the back of growing exports and industrial production. But the brighter data comes a day after the yen soared to three-year highs of around 107.50 to the dollar , up more than 10 percent in less than four months, raising concerns that Japanese exports would be less price-competitive. The Bank of Japan begins a two-day policy-setting meeting later on Thursday. Economists expect the central bank to maintain its hyper-easy monetary policy, although pressure to take more stimulus steps could increase if stock prices fall further. Tokyo's Nikkei share average <.N225> ended the morning up 0.88 percent at 9,699.58, after rising as high as 9,777.99. But sentiment has been battered after recent sharp falls that pushed it below 10,000 last week for the first time since August.//