Soaring trade deficit gives Japan record low first-half current account surplus


Japan logged a record low first-half current account surplus of ¥2.024 trillion in the April-September period, as the soaring trade deficit outweighed expansion of income from foreign investment, government data showed Tuesday.

The surplus in the primary income account, which reflects how much Japan earns from its foreign investments, gained 1.4 percent from the previous year to ¥9.149 trillion, the largest for the half fiscal year, the Finance Ministry said in a preliminary report.

But the balance of goods traded marked a deficit of ¥4.397 trillion, reducing the country’s current account surplus — one of the widest gauges of international trade for a nation.

Imports climbed 6.7 percent from a year earlier to ¥40.564 trillion against a backdrop of rising imports of liquefied natural gas and the depreciation of the yen, while exports rose 5.5 percent to ¥36.167 trillion.

The services sector, including passenger transportation and cargo shipping, posted a deficit of ¥1.815 trillion.

For September alone, Japan posted a current account surplus for the third straight month, standing at ¥963.0 billion.

During the fiscal first half, the yen dropped versus the dollar by 4.2 percent on the year to 103.00 on an average basis, while falling against the euro by 6.9 percent to 138.90, the ministry said.

The current account surplus is expected to widen as the yen’s slide will drive up profits from overseas investments, possibly offsetting growth in fuel energy imports triggered by the suspension of nuclear power generation, some analysts said.

Others, however, say the current account balance is unlikely to make a full-fledged improvement. They argue that the pace of recovery in exports may slow as many Japanese manufacturers over the last several years shifted their production abroad in an attempt to mitigate the adverse effects of the yen’s previous appreciation.

The recent depreciation of the yen is also forecast to continue to raise import costs ahead, preventing the current account surplus from expanding sharply.

A falling yen usually supports exports and boosts income from foreign investments, as the value of overseas revenues and profits rises in yen terms. But it also pushes up import prices, and Japan depends on imports for around 90 percent of its energy needs and about 60 percent of its food supplies.

Amid expectations that the interest-rate gap between Japan and the United States will widen further, the yen has remained on a downward trend. The dollar rose above ¥115 late last week for the first time in about seven years, soaring from the mid-¥102 range in early August.