TOKYO, March 24 - Japan's economy got off to a modestly positive start this year, thanks to robust exports to Asia despite persistent worries about a global downturn, government data showed on Monday. The Ministry of Economy, Trade and Industry's (METI) all-industries index, often used as a proxy for gross domestic product (GDP), rose 1.7 percent in January from the previous month, slightly better than economists' forecasts. Previous data had shown that Japan's GDP grew 0.5 percent in the three months to December, and a positive January-March figure would extend the expansion to five straight quarters.
Underscoring the view that the economy is drawing strength from external demand, particularly from Asia, trade figures released by the Ministry of Finance showed that exports in February rose for the 11th straight month from year-ago levels, up 7.6 percent at 4.33 trillion yen ($35.77 billion). "The tertiary and all-industries indices were both strong, but it is unclear whether it will remain as strong for February and March," said Shuji Shirota, an economist at Dresdner Kleinwort Wasserstein.
Not everything looked bright, as worries about the global economic impact of a U.S.-led war in Iraq cast a long shadow, with economic activity in the United States, Japan's biggest trading partner, expected to slow. "The trade surplus did not grow as much as we expected. The worrying factor is the falling surplus with the United States," Shirota said. Exports to the United States fell by 13.6 percent, the second straight month of decline, as shipments of automobiles fell 20.9 percent -- the first decline in six months.
SUPPORT FROM ASIAN DEMAND
For now, strong Asian demand for Japanese goods is supporting exports. Japanese exports to Asia grew 24.7 percent from a year earlier, the 12th straight month of increase, with shipments to China soaring 66.6 percent.
Overall February exports were also up from the previous month, rising 2.1 percent on a seasonally adjusted basis. Imports were up 4.5 percent from a year earlier at 3.39 trillion yen but down 1.7 percent from a month earlier. The trade surplus widened 20.4 percent from a year earlier. In a sign that domestic demand is holding up for now, the tertiary sector index, a core component of the METI's all-industries index mainly covering the services industry, rose 1.8 percent from the previous month. But economists warned against becoming too optimistic. "The rises in all-industries and tertiary sector index simply indicate a reaction to falls in the past four months, but we really cannot be optimistic about the outlook of the domestic economy," said Takeshi Minami, a strategist at UFJ Tsubasa Securities.
A poll of 15 economists last week had produced a median forecast of a 0.7 percent rise for the all-industries index and a 0.5 percent rise for the tertiary sector index.//