Japan current-account surplus rebounds

RIFAN FINANCINDO BERJANGKA – Japan posted an unexpectedly large current account surplus in September, the third consecutive monthly surplus, as a weaker yen lifted the value of overseas investment income, despite continuing trade deficits.

The Y963.0 billion ($8.1 billion) surplus, the broadest measure of trade with the rest of the world, was 61.9% wider than a year earlier, Ministry of Finance data showed Tuesday. It compared with a Y532.2 billion surplus forecast by economists surveyed by The Wall Street Journal and The Nikkei.

As an export powerhouse until recently, Japan posted current account surpluses of more than Y10 trillion yearly. But economists say those days are gone. Now, shrinking surpluses highlight a shift in Japan’s trade with the world, with exports not picking up as lawmakers and economists had expected.

The monthly current account balance has fallen into the red in recent years as the country relies more on expensive imported fuel to make up for offline nuclear reactors. More Japanese firms have moved production overseas, meaning their output isn’t?counted in the trade balance.

Prime Minister Shinzo Abe came to power almost two years ago calling for a weaker yen that would lift exports. Yet there has yet to be a significant rebound, and the weaker yen has actually pushed up trade deficits by inflating import prices.

Some economists have worried about the risk of a fiscal crisis if Japan keeps posting current account deficits. Such a scenario would mean Japan would have to rely on overseas capital to finance its debts. Foreign investors might ask for larger premiums to hold Japanese sovereign bonds given the large public debt, pushing yields up and potentially making it impossible for the government to honor its debts.

Japan posted a Y2.04 trillion surplus in the primary income account, which includes income from holdings of stocks and bonds overseas. That was a jump of 24.5% on year as the yen weakened significantly against major currencies during the period. It was also the largest on record for the month of September since comparable data were first compiled in 1985. The dollar bought Y104.11 at the end of August and Y109.60 on Sept. 30.

The weaker yen also helped push up the cost of imports and contributed to a larger trade deficit in September. The nation marked a Y714.5 billion trade deficit for the month, up 0.1% on year.

Source : MarketWatch