Export may exceed forecast on Japan's stronger economy

Export may exceed forecast on Japan's stronger economy

The Jakarta Post, Jakarta

Japan's better-than-expected economic growth, marked by the
upward revision of its first quarter growth, has sparked hopes
that Indonesia's non-oil and gas exports may rise higher than
earlier projected.

Senior executive for international trade at the Indonesian
Chamber of Commerce and Trade (Kadin) Soy Pardede told The
Jakarta Post recently that the country's relatively slow export
growth could be boosted by Japan's faster economic growth.

"For every 1 percent increase in Japan's gross domestic
product (GDP), it can lift our non-oil and gas exports by 5
percent," said Soy.

"The country's non-oil and gas exports this year will be
mainly driven by growing demand from the United State and Japan,
rather by an increase in output and diversification of products,"
he said.

Soy explained that the country's 2004 export growth may exceed
an earlier forecast of 7 percent on the back of Japan's stronger
economic growth.

Indonesia, Southeast Asia's largest economy, is counting on
exports and consumer spending to achieve its 4.8 percent growth
target this year, as investment remains in the doldrums.

The government has estimated non-oil and gas export this year
to grow by 7 percent from US$47.38 billion in 2003 to $50.7
billion.

Japan, Indonesia's second largest export destination, has
projected its economy to expand by 4 percent this year. But many
analysts believe that the growth would exceed the projection due
to stronger private consumption and inventories at home, and
booming export to other Asian countries.

Japan's first quarter economic growth was revised up last week
to 1.5 percent, higher than the initial forecast of 1.4 percent,
due primarily to a boost in private inventories. The quarterly
growth is equivalent to an annualized 6.1 percent, higher than
the 5.6 percent estimate in May.

Japan has enjoyed the best economic performance of the world's
top seven industrialized nations. Along with the United States,
Japan makes up 40 percent of the world's economy.

The surprising growth has also resulted in the speculation
that the Bank of Japan may raise interest rates in order to keep
prices stable, meaning that the plan will balance the recent
impact of the rising U.S. dollar against regional currencies.

Currency analyst Ryan Kiryanto from Bank Negara Indonesia said
that the rupiah could benefit from a rise in Japan's interest
rate as it may strengthen the yen against the U.S. dollar, a
development that would spill over to other currencies in the
region including the rupiah.

"The rupiah will benefit if Japan finally decides to raise its
rates. The decision will balance the rising value of the
dollar ... But I guess the impact will only help bring the rupiah
to as much as Rp 9,000 per dollar," said Ryan.

The dollar has recently enjoyed a higher value primarily due
to the U.S. Federal Reserve's plan to raise its interest rate
from the current 46-year low of one percent in order to curb
inflation, attract overseas capital to finance its current
account deficit, and to strengthen the U.S. dollar value.

The rupiah lost an average of 4.8 percent against the dollar
in May alone primarily due to a speculation over the possible
hike in the U.S. rates.