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Current account logs 0.6% first-half surplus

Direct investment offsetting deficit from fuel imports

Kyodo

Japan’s current account surplus grew 0.6 percent from a year earlier to ¥3.21 trillion for the six months through June, marking the first rise in five half-year periods, government data showed Thursday.

The result was driven by growth in direct investment income, which more than offset a trade deficit on increasing fuel imports.

However, the surplus in the balance, one of the widest gauges of international trade, was the second-lowest on a first-half basis since comparable data became available in 1985.

The income account, which reflects how much Japan earns from its foreign investments, posted a surplus of ¥8.68 trillion, up 19.3 percent on the year and the largest for any six-month period since 1985, boosted by higher dividends and profits from securities investments on the back of the yen’s recent depreciation.

Trade in goods saw a deficit of ¥4.24 trillion — the biggest for any half-year period — as imports increased 8.6 percent to ¥36.91 trillion on the yen’s depreciation, outweighing growth in exports, which rose 3.5 percent to ¥32.68 trillion.

A weakening yen boosts the competitiveness of Japanese exporters and increases the value of overseas revenue in yen terms, but it also pushes up import costs.

The biggest goods trade deficit on record was also attributed to increasing imports of natural gas and oil to reboot thermal power plants as an alternative to nuclear energy in light of the Fukushima meltdowns crisis.

The balance of services trade, covering such elements as travel payments and transport costs, logged a deficit of ¥720.7 billion, expanding by ¥251.7 billion.

Analysts say the current account balance will probably keep growing modestly as the yen’s weakening against other major currencies will continue to help buoy the country’s income account.

“Although import costs are rising due to the yen’s fall, the amount of natural oil and gas imports itself is not likely to increase that much down the road,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“On the other hand, exports are expected to grow further if there are clearer signs of a U.S. economic recovery. The effect of the weakening yen (on boosting the income account) is also significant,” he said.

For June alone, the nation posted a current account surplus of ¥336.3 billion for a fifth consecutive monthly rise. Of the total, exports rose 6.7 percent to ¥5.79 trillion from a year earlier while imports were up 11.6 percent at ¥5.93 trillion.