Japan-bashers who decry the nation's growing trade surplus are missing the boat, according to economist Albert Edwards of Kleinwort Benson Securities Ltd. in London. To be sure, Japan's trade surplus has exploded, to $9.8 billion in September-42% above its year-earlier level. But Edwards points out that this is largely the result of shifting exchange rates and domestic weakness, which is depressing imports.
Export numbers tell the story. Although Japanese exports in September were 6.9% above September, 1990, in dollars, they were nearly flat when measured in yen and in volume terms. Dollar exports are up mainly because the dollar has been sharply lower than its year-earlier level. But Edwards believes that this currency effect is waning. With Japan's domestic economy entering recession and interest-rate cuts likely to foster yen weakness, he predicts that any rise in the trade surplus in the year ahead will be "solely a function of weak domestic demand for imports."