A big jump in Japan's external surplus fanned fears of trade friction yesterday as Japanese Prime Minister Ryutaro Hashimoto prepares for a summit meeting of the Group of Seven industrialized nations next week.

The surplus in the current account, the broadest measure of trade in goods and services, rose 92.7% to 1.09 trillion yen ($13.5 billion) in April from a year ago as higher taxes dampened imports and the U.S. economy sucked in Japanese goods.

The surplus in merchandise trade alone rose 90.9% from a year earlier to 1.02 trillion yen.

The surge in the surplus had been widely anticipated and initially caused only a ripple on financial markets. But the U.S. quickly sounded a warning about the growing trade gap, stoking trade friction jitters and sending the US$ tumbling to almost seven-month lows below 111 yen.

U.S. Deputy Treasury Secretary Lawrence Summers said in a speech to be delivered to a trade group in Denver that Japan should avoid running up external surpluses that would hurt global growth, and instead should foster demand-led recovery at home.

Earlier this week, U.S. Trade Representative Charlene Barshefsky expressed concern about what she called ``disturbing'' trends in Japan's trade balance and repeated that Washington did not want a big rise in Japan's surplus.

But some economists said the outlook was for a rising surplus. ``Japan's surplus is on a very rapid widening trend. We had a widening surplus in the last seven months with the United States. What is taking place here, is suddenly a big explosion in the surplus vis-a-vis Europe, and even with Asia,'' said Mineko Sasaki-Smith, chief economist at Credit Suisse First Boston.

``A very straightforward way of looking at the issue is that Japan wants help from external demand to help its economic recovery,'' said Mamoru Yamaguchi, an economist at Nikko Research Centre.

Japanese officials have said that the nation's economic recovery may suffer a temporary setback from a rise in the consumption tax that took effect on April 1. But they say the recovery is still on track, centring on domestic demand.

``Japan's top business leaders have said that a dollar rate of 110 to 120 yen was desirable. I think the government also believes that this range is where Japan can receive merits of a weak yen without being criticized by the United States.''

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	Please send comments to: g8@utoronto.ca Revised: June 19, 1997.

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