As the depreciation of the yen and growing demand for energy drove up import costs, the nation’s current account surplus in August plunged 63.7 percent from a year earlier to ¥161.5 billion, government data showed Tuesday.
The balance of international payments, one of the widest gauges of trade for a country, logged a surplus for the seventh straight month, but it was smaller than the ¥577.3 billion surplus in July, the Finance Ministry said in a preliminary report.
The goods trade balance posted a deficit of ¥885.9 billion in August, as imports grew 16.4 percent from a year earlier to ¥6.413 trillion against a backdrop of rising imports of crude oil, while exports climbed 14.1 percent to ¥5.527 trillion. The income account, which reflects how much Japan earns from its foreign investments, fell for the first time in nine months, down 10.0 percent from a year earlier, but still stood at a surplus of ¥1.253 trillion and offset the trade deficit.
During the same month, the Japanese currency slid against the dollar by 24.4 percent on year on an average basis and the euro by 33.5 percent, according to the ministry. A weakening yen usually boosts the competitiveness of Japanese exporters and increases the value of overseas revenue in yen terms, while pushing up import costs.
Import costs have also been rising as demand for natural gas and oil has been growing from power companies for fossil fuel-based power generation as an alternative to nuclear power amid the reactor shutdowns in connection with the Fukushima nuclear crisis. Japan depends on imports for more than 90 percent of its energy needs.
Analysts, however, said Japan’s current account balance is likely to maintain a surplus for the time being, as Prime Minister Shinzo Abe’s economic policies could keep the yen relatively low and the country’s income account on an uptrend. “The income account surplus shrank in August, but it is expected to grow again with the yen falling and the global economy recovering,” said Takeshi Minami, chief economist at Norinchukin Research Institute.