Japan's current account surplus shrinks to five-year low as exports plunge

Japan posted its smallest current account surplus in more than five years in June, Ministry of Finance data showed on Tuesday, mainly due to a slump in exports, highlighting the heavy hit to external demand from the coronavirus pandemic.

The current account surplus was ¥167.5 billion ($1.58 billion), the smallest monthly surplus since January 2015, a finance ministry official said.

That compared with a median forecast for a ¥110 billion surplus, and a ¥1.177 trillion surplus in May. The current account balance has maintained a run of uninterrupted monthly surpluses for six years.

Exports plunged 25.7 percent in June from a year ago, hit hard by falling shipments of cars and car parts to the United States, the data showed. That was slightly smaller than a 28.9 percent annual decline in May.

Imports shed an annual 14.4 percent, following a 27.7 percent annual fall in May. As a result, the trade deficit in June widened to ¥157.7 billion.

A 99.9 percent drop in foreign tourists due to immigration restrictions imposed over the health crisis sent the travel account to a ¥157.7 billion deficit in June, the data showed.

Weakening overseas demand has raised worries of a prolonged downturn for the world’s third-largest economy, with some analysts seeing the impact from the COVID-19 crisis on corporate and household sentiment lasting into next year.

A Reuters poll showed analysts expect gross domestic product data, due to be released on Monday, to show the economy shrank an annualized 27.2 percent in the second quarter.

Japan’s economic activity has picked up in recent months since the government lifted a coronavirus-related state of emergency at the end of May. But the virus has made a worrying revival, especially in highly populated areas.