Japanese companies attracted to Asian market

Japanese companies attracted to Asian market

By Tim Cribb

TOKYO (AFP): Japan's current account data due out this week is
expected to underscore the enormity of its growing surplus with
Asia, which officials say is being fueled by the shift of its
companies into the region.

Driven by the strong yen and the search for cheap places to
produce, Japanese companies have set up joint ventures and
subsidiaries throughout the region, generating as they go a hefty
surplus for the nation's balance sheet.

The Japanese companies export capital equipment and supplies
for their overseas factories in the region and then ship the
finished goods to Japan and third countries.

While Japan's politically-sensitive trade surplus with the
United States declined 17 percent in 1995 from a year earlier to
US$45.6 billion, according to preliminary finance ministry
figures released last month, Asia firmly emerged as Japan's most
important trading region.

Those figures differ from the wider official balance of
payments' figures due to be released on Thursday, but they are in
the same ball park.

By the ministry's count on a customs-cleared basis, Japan's
surplus with Asia in 1995 grew for the sixth consecutive year, up
14.9 percent to $70.8 billion, notably with Malaysia and
Thailand.

Only with China and to a lesser extent oil supplier Indonesia
was Japan in deficit.

Japanese exports to China totaled $21.9 billion, up 17
percent, while imports were worth $35.9 billion, a rise of 30
percent, the Japan External Trade Organization (Jetro) said,
citing the ministry's trade data.

Nearly 80 percent of imports from China were of manufactured
goods, mainly textile products and machinery.

The surge in imports was partly due to increased shipments of
products made by Japanese companies' joint ventures and
subsidiaries in China, Jetro said.

Imports of radios and televisions doubled from the year before
and those of video cassette recorders marked a fivefold increase,
it said.

Exports to China were mainly of equipment and raw materials,
such as metal processing machinery, electronic parts and
synthetic fiber textiles for use by Japanese companies'
subsidiaries and joint ventures.

"Japanese joint ventures are importing parts, raw materials
and capital equipment from Japan and sending back the finished
products," a Jetro official told AFP, adding: "The trend between
Japan and China is the same for Japan and Thailand, and elsewhere
in East Asia."

Jetro data showed that of Japan's imports from Thailand, about
60 percent are manufactured goods, more than half being machinery
and equipment, compared with about 30 percent in foodstuffs, more
than a third of that seafoods.

Most of Japan's exports to Thailand are manufactured products,
predominantly machinery and equipment.

In terms of direct foreign investment, Japanese companies
injected $512 million into Thailand in the six months to
September.

From Malaysia, Japan's imports of raw materials and mineral
fuels are about the same as its imports of manufactured goods,
mainly machinery and equipment.

It exports manufactured goods, again mainly machinery and
equipment.

But there is a perceived cause for concern.

The 1995 Foreign Direct Investment White Paper noted: "Eastern
Asian countries have been generous about the expansion of Japan's
trade surplus, saying that it was a necessary investment for
future exports of manufactured products, but they have gradually
begun to show concern."

Thailand has sought a correction in the trade surplus, its
deficit with Japan accounting for more than 90 percent of its
total trade deficit.

"Even Lee Kuan Yew of Singapore, who is an advocate of free
trade, has expressed concern," the white paper said.

It concluded that Japan needed to curb the expansion of the
trade surplus with East Asia "by increasing imports of
manufactured products and promoting the local procurement of
parts."

The ratio of imports of manufactured goods is now more than 60
percent of Japan's total imports from East Asia, its nine
economies ranked in Japan's top 20 sources of manufactured
products.