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Softer yen helps earnings abroad top trade deficit

Securities investments buoy current account

Kyodo

Japan logged its first current account surplus in four months in February, with profits from the securities investments income account outweighing the trade deficit, preliminary data showed Monday.

The surplus in the balance, one of the widest gauges of international trade, stood at ¥637.4 billion, down 47.0 percent from the year before, the Finance Ministry said in the report.

The current account balance will likely need more time to gain strength. The income account, which reflects how much Japan earns from foreign investments, logged a surplus of ¥1.407 trillion, up 13.1 percent from a year ago, helped by higher dividends and profits from securities investments aided by a weaker yen. The surplus marked the third consecutive month of gains.

A weaker yen generally boosts the value of investors’ overseas investment gains if retained in yen terms. The currency has weakened significantly since Prime Minister Shinzo Abe began announcing he would pursue an unorthodox policy of aggressive monetary easing.

But trade in goods produced a deficit of ¥677.0 billion, the eighth consecutive monthly fall.

Exports fell 3.5 percent from a year earlier to ¥5.066 trillion, dragged down by a decline in exports to China and the European Union, while imports climbed 11.5 percent to ¥5.743 trillion as mineral fuel imports increased.

As Japan’s ties with China deteriorate over a territorial dispute and Europe remains mired in an economic slump amid its prolonged sovereign debt problems, some analysts still say Japan’s current account balance could improve down the road because exports are likely to recover.

“As the global economy moderately recovers, we expect the trade deficit to shrink moderately,” provided that the decline in exports to China caused by the territorial issue will recover, Yuriko Tanaka, economist at Goldman Sachs Japan Co., said in a report.

The weaker yen has shoved up import costs at a time when demand for natural gas and oil is soaring from power companies eager for fossil fuels following the loss of nuclear power caused the Fukushima disaster.

The ministry said the yen sank 18.8 percent against the dollar and 19.7 percent against the euro in February amid expectations for aggressive monetary easing by the Bank of Japan.

Saying that a trade balance has a major impact on the account balance, a Finance Ministry official said the ministry will “monitor developments in economic conditions both at home and abroad, foreign exchange rates and prices of (liquefied) natural gas and oil.”