Japan posts record current account surplus in August as import prices rise

  • Current account surplus at 58.9 trillion yen, lowest in August
  • Fall in surplus expected to continue in long term – analyst
  • Weak yen helps excess income hit record high
  • Revenue gains more than offset the trade deficit

TOKYO, Oct 11 (Reuters) – Japan’s current account surplus fell to its lowest level on record for August, finance ministry data showed on Tuesday, as oil import prices soared energy outpacing rising export prices and depleting national wealth.

The surplus came to 58.9 billion yen ($404.45 million), lower than economists’ median forecast of 121.8 billion yen in a Reuters poll. On a seasonally adjusted basis, the account was in deficit for a second month, at 530.5 billion yen.

The continuous trade surplus in the past and the growth of overseas investment means that Japan has never run a current account deficit on an annual basis. But a deteriorating trade balance has reduced the surplus for four consecutive years.

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“What’s happening right now is a shift in income from commodity-importing countries like Japan to commodity-exporting countries,” said Masamichi Adachi, chief economist at UBS Securities. “I think the current account surplus will shrink as trade deficits persist, eroding Japan’s purchasing power and impoverishing it.”

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The current account surplus has long been seen as a sign of export strength and a source of confidence in the safe-haven yen, but in recent years the account has occasionally swung into deficit on a monthly basis.

While the cost of imports increases as the yen weakens, the concomitant increase in exports becoming cheaper for overseas buyers has not been as significant due to companies shifting production overseas. – a consequence of a previously strong yen making exports costly.

Japan is offsetting trade deficits with returns from a growing number of overseas investments – its primary income balance hit a record 3.327 trillion yen in August, helped by a weak yen. But a deterioration in the balance of payments highlights structural economic changes and goes against Japan’s image as a trading power.

Policymakers are also increasingly concerned about the weak yen which is pushing up import bills and the cost of living for households due to a heavy reliance on fuel and food imports.

($1 = 145.6300 yen)

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Editing by Christopher Cushing and Jacqueline Wong

Our standards: The Thomson Reuters Trust Principles.

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