Japanese imports rose to a record in April, suggesting that growing domestic demand is helping the world's second-largest economy extend its recovery.

Imports rose 1.1 per cent from March to 3.9 trillion yen (US$34.9 billion), seasonally adjusted, the Ministry of Finance said in Tokyo. Exports rose 0.5 per cent to 4.88 trillion yen (US$43.96 billion), also a record. The trade surplus shrank to 985.5 billion yen (US$8.88 billion) from 1 trillion yen (US$9 billion) in March.

Sharp Corp and other manufacturers imported machinery and equipment as they added capacity to meet rising overseas and local demand. Japanese consumers are also buying more imported goods as a recovery from a third recession since 1991 drove unemployment to a three-year low, lifting confidence.

"Import growth is high, which signals a recovery in domestic demand," said Takuji Aida, a senior economist at Merrill Lynch Japan Securities, after the report was released. "Domestic demand is going to determine whether Japan's economic expansion is going to be sustainable."

The yen traded near its strongest since May 7 after the report. The yen rose as high as 111.58 and was at 111.63 to the dollar at 4:05 pm yesterday in Tokyo from 111.70 yen late on Tuesday in New York.

The Nikkei 225 Stock Average rose 1.7 per cent to close at 11,152.09 at 3 pm yesterday in Tokyo. Exporters including Sharp gained on optimism growth in the US will bolster sales.

The trade surplus had been expected to shrink to 892 billion yen (US$8.03 billion), according to the median of 13 forecasts in a Bloomberg News survey.

Global demand

From a year earlier, the surplus rose 30 per cent to 1.08 trillion yen (US$9.72 billion). Exports rose 10.8 per cent, and imports rose 6.5 per cent. Both imports and exports rose to their second-highest totals on record on an unadjusted basis.

Overseas demand for electronics equipment rose 15.8 per cent from a year earlier, according to the report. Machinery including semiconductors led the gains in imports, rising 11 per cent from a year earlier, according to the unadjusted figures.

Manufacturers including NEC Electronics Corp are increasing spending to meet higher demand for electronic chips used in mobile phones. That is fueling demand for imported raw materials and other goods, economists said.

NEC Electronics, the world's largest maker of semiconductors for cell phone screens, said this month it plans to finish construction of a 5 billion yen (US$45.04 million) plant by November and start production in about a year.

Oil prices

Exports rose for the fifth month in six in April as accelerating economic growth in the US and Asia boosted demand for Japanese digital cameras, flat-panel displays and other electronics products. The US economy will grow 4.5 per cent this year, the most since 1991, the Organization for Economic Co-operation and Development said this month.

Trade volumes, which do not take into account price fluctuations, also rose in April. Export volumes rose 12.9 per cent from a year earlier, the fifth straight month of double-digit growth. Import volumes rose for the eighth month, gaining 10.1 per cent.

Japan's economy expanded at a 5.6 per cent annual pace in the first three months of this year, the government said last week, more than economists had predicted. Exports accounted for about a fifth of that growth, with consumer spending and capital spending contributing the rest.

Japan, which imports all of its oil, will probably weather an increase in energy prices, said economists including Yasukazu Shimizu. The price of Dubai crude oil, an Asian benchmark, has risen 31 per cent in the past six months.

Consumer spending

"While crude oil prices have been rising, that alone won't be enough to derail economic growth significantly," said Shimizu, a senior market economist at Mizuho Securities.

Crude oil imports by Japan, the world's larger consumer after the US and China, rose 7 per cent in April from a year earlier, the first gain in three months.

Consumer spending is rising as manufacturers including Toyota Motor Corp hire more workers, driving unemployment to a three- year low of 4.7 per cent in March. Consumer spending is taking over as the biggest driver of growth, making the world's second-largest economy less dependent on exports.

Goldman Sachs Japan Ltd and Merrill Lynch Japan Securities Co last week raised their forecasts for Japan's growth this fiscal year because of higher capital spending and personal consumption.

Goldman Sachs raised its growth forecast for the year ending March 31 to 3.7 per cent from 3 per cent. Merrill Lynch Japan also expects the economy to expand 3.7 per cent from a previous forecast of 3 per cent.

(China Daily 05/27/2004 page12)