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Key trade gauge logs surprise rise in half

Kyodo

The current account surplus rose in the first six months of fiscal 2013, the first surge in six half-year periods, as growth in direct investment income outweighed a trade deficit triggered by a surge in fossil fuel imports, government data showed Monday.

The surplus in the balance of international payments, one of the widest gauges of trade for a country, climbed 10.7 percent from a year earlier to ¥3.0548 trillion in the April-September period, the Finance Ministry said in a preliminary report.

The goods trade balance came to a deficit of ¥4.6664 trillion during the six months, the largest for any half-year period since comparable data became available in 1985, as a weaker yen continued to drive up import costs, it said.

Imports increased 14.5 percent to ¥38.5101 trillion in the first half of the current fiscal year, while exports rose 9.2 percent to ¥33.8437 trillion.

The income account, which reflects how much Japan earns from its foreign investments, logged a record surplus of ¥8.9950 trillion, buoyed by higher dividends and profits from securities investments on the back of the depreciation of the yen.

During the same period, the Japanese currency slid against the dollar by 24.5 percent on year on an average basis and the euro by 29.3 percent, the ministry said.

A falling yen usually supports exports by making Japanese firms’ products cheaper abroad and increases the value of overseas revenue in yen terms, but it pushes up import prices.

Import costs have also been rising as demand for natural gas and oil has been growing from utility companies for fossil fuel-based power generation as an alternative to nuclear power amid the Fukushima nuclear crisis that started in March 2011. Japan depends on imports for more than 90 percent of its energy needs.

Analysts, however, said Japan’s current account balance is likely to shrink down the road, as Prime Minister Shinzo Abe’s economic policies, entailing drastic monetary easing by the Bank of Japan, could keep the yen relatively low, helping the country’s exports expand.

“As the global economy is expected to recover gradually, Japanese exports may grow further, which would contribute to improvement in the current account balance,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

Minami added that Japan’s income account could continue gaining, as the U.S. Federal Reserve is likely to begin tapering its asset purchases in the near future, possibly devaluing the yen versus the dollar and hoisting long-term interest rates in the United States.

In the first half of this fiscal year, the service sector, including passenger transportation and cargo shipping, registered a deficit of ¥784.8 billion, but the deficit narrowed by ¥854.8 billion as the number of foreign travelers to Japan grew 24.2 percent on year.

In September alone, the nation’s current account balance surplus grew 14.3 percent from a year earlier to ¥587.3 billion, up for the eighth straight month, the ministry said. The surplus amounted to ¥161.5 billion in August.