Jan. 26 (Bloomberg) -- Japanese exports gained in December and set a record in 2003, prompting brokerages including Merrill Lynch & Co. to consider raising their estimates for growth in the world's second-largest economy. Exports rose 1.6 percent from November, seasonally adjusted, and imports fell 0.6 percent, the finance ministry said in Tokyo. The trade surplus rose 9.9 percent to a seasonally adjusted 1.12 trillion yen ($10.5 billion) from 1.02 trillion yen in November. The yen rose 0.5 percent against the dollar as Merrill Lynch and J.P. Morgan Securities Asia Ltd. said growth may exceed their estimates for the fourth quarter. Chinese and European demand helped exports rise 4.7 percent to a record 54.6 trillion yen last year and prompted companies including Advantest Corp. and Sanyo Electric Co. to raise profit forecasts. ``The fourth-quarter gain in net exports is going to be much bigger than initially expected,'' said Takuji Aida, senior economist at Merrill Lynch Japan Securities. Aida said economic growth in the three months ended Dec. 31 was probably higher than the 0.2 percent expansion the company forecast last month.
The yen strengthened to 106.21 to the dollar at 4:29 p.m. in Tokyo from 106.75 late Friday in New York. The yen's 11 percent gain against the dollar in the past year may curb the recovery by making Japanese goods more expensive abroad. The Bank of Japan sold a record 20.1 trillion yen last year to slow the currency's gains and protect the export-led recovery.
Volume Grows
Manufacturers are ``not really so much concerned with the absolute rate'' of the yen ``so long as it's stable,'' Masayuki Matsushita, vice chairman of Matsushita Electric Industrial Co., said in a televised interview with Bloomberg News in Davos, Switzerland. ``I would be comfortable if it stays between 105 and 115,'' Matsushita said. For now, growing global demand is helping to offset the effects of a strong yen. Exports measured by volume rose 12.6 percent in December, the sixth straight increase, and imports by volume rose 9.2 percent, the fourth increase. ``The faster growth in exports is what will propel growth in the fourth quarter,'' said Osamu Tanaka, an economist at Morgan Stanley Japan Ltd. Exports rose 4 percent from a year earlier in the fourth quarter, while imports fell 0.5 percent. Tanaka said the economy may have grown at an annual pace of about 5 percent in the period to Dec. 31, exceeding the firm's estimate for growth of about 4.7 percent. J.P. Morgan Securities Asia will probably raise its fourth- quarter growth estimate from an annual pace of 3.5 percent, said economist Ryo Hino. He said gains in machinery orders showed that capital spending is likely to rise, helping growth.
Profit Forecasts
Advantest President Hiroshi Ohura said earlier this month that the world's biggest maker of memory-chip testing equipment may raise its full-year profit forecast as orders probably doubled in the nine months ended December, to about 140 billion yen. Advantest was the biggest contributor to the Nikkei 225 Stock Average's 24 percent gain last year. Japanese spending on computer hardware, software, consulting and support services this year will rise 2.2 percent to 12.2 trillion yen, IDC Japan, a technology research company, said this month. Sanyo Electric Co., the world's largest maker of digital cameras, last week said operating profit would rise 58 percent in the year starting April 1, 2005, from this business year as global demand increases. Sanyo makes digital cameras for Olympus Corp. and other manufacturers.
`Recovery'
``An improvement in company earnings, rising capital expenditures and other measures are showing that the Japanese economy has recovered,'' Prime Minister Junichiro Koizumi told the opening session of Japan's parliament last week. Overseas sales and capital spending accounted for all of Japan's 1.4 percent annual pace of economic growth in the third quarter of last year, overcoming a decline in consumer spending. China's gross domestic product rose 9.1 percent in 2003, the fastest pace in six years, and the U.S. economy grew at an 8.2 percent pace in the third quarter, the fastest in 20 years. Last week, the central bank unexpectedly decided to pump more money into the economy to protect the economic recovery and blunt the yen's rise. The bank raised the upper limit of the reserves it makes available to commercial banks to 35 trillion yen from 32 trillion yen, the first increase since October.
Exports to China
``It's necessary to closely monitor movements of financial and foreign exchange markets and their impact'' on the economy, Bank of Japan Governor Toshihiko Fukui said in a speech in Tokyo today to the central bank's branch managers. In 2003, the trade surplus rose 3.6 percent to 10.24 trillion yen. Imports rose 5 percent to a record 44.3 trillion yen, led by oil and related products. The average price of crude oil last year rose 12.5 percent to $26.72 per barrel. Exports to China rose 33 percent to a record 6.63 trillion yen last year, accounting for about 12 percent of the total. Exports to the U.S. fell 9.8 percent to 13.4 trillion yen, about a quarter of the total. From a year earlier, the December trade surplus rose 41 percent to 1.12 trillion yen, without adjusting for seasonal factors, today's report showed. Exports rose 8.5 percent, and imports rose 1.6 percent. //www.bloomberg.com