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Fuel costs yield deficit in current account

Kyodo

The current account balance logged its first deficit in nine months in October as a surge in fuel imports more than offset increases in exports and direct investment income, government data showed Monday.

The deficit in the balance, one of the widest gauges of international trade, stood at ¥127.9 billion in October, the Finance Ministry said in a preliminary report.

In September the balanced showed a surplus of ¥587.3 billion.

The goods trade balance had a deficit of ¥1.09 trillion, the largest for an October since 1985, when officials started compiling comparable data, as imports grew 28.2 percent from a year earlier to ¥6.93 trillion, due to rising imports of crude oil and liquefied natural gas,m and a cheaper yen to pay for them.

Exports expanded 17.9 percent to ¥5.83 trillion, due mainly to increased exports of automobiles, but that wasn’t enough to offset the deficit.

The income account, which reflects how much Japan earns from its foreign investments, rose 9.1 percent to ¥1.36 trillion for the second consecutive month of increase, due partly to the effects of the weakened yen.

During the month, the yen took a 23.9 percent plunge against the dollar year on year on an average basis, and a 30.2 percent against the euro, the ministry said.

A weaker yen usually boosts the competitiveness of Japanese exporters and increases the value of overseas revenue in yen terms, while pushing up import costs.

Despite reporting the first red ink in nine months in October, some analysts said the move is likely to be temporary as the country’s income account is projected to continue rising to offset trade deficits.

Takeshi Minami, chief economist at the Norinchukin Research Institute, said the trade deficit is expected to continue for some time as the need for hefty fuel imports will continue while nuclear reactors remain shut down.

Last-minute demand before the consumption tax rises in April could also push up imports of such items as semiconductors and electric components, he said.

But Minami said Japan’s income account is likely to keep increasing as stocks and interest rates rise overseas, adding that “it is likely to secure a surplus which surpasses the value of a trade deficit.”