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By Harumi Taguchi, Principal Economist, IHS Markit

Key Points:

  • Japan’s current-account surplus narrowed by 5.6% year on year (y/y) to JPY1.3 trillion (USD12.1 billion) on a non-seasonally adjusted basis in November 2017. It also contracted by 30.4% month on month (m/m) to JPY1.7 trillion on a seasonally adjusted basis, following a 33.8% m/m rise in the previous month.
  • The y/y weakness reflected a 44.8% drop in the trade surplus and a 34.3% drop in the service balance surplus, offsetting a 10.4% rise in the primary income balance. Import continued to grow, moving up 17.6% y/y, largely because of higher prices of oil and other resources as well as a surge in mobile phone imports. That outpaced a 13.9% rise in exports, although solid demand for semiconductors and related machinery drove export growth.
  • The fall in the service balance surplus largely reflected a decline in credit from technical, trade-related and other business services, offsetting a continued increase in the travel balance. However, the primary balance rose thanks to an increase in portfolio investment income.

IHS Markit Views:

Although recent rises in the prices of oil and other resources could weigh on Japan’s trade surplus, the current-account surplus is unlikely to drop sharply over the near term, given that upward revisions in the growth of Japan’s trade partners’ economies mean sustained external demand.

Improved global economic conditions and ongoing demand will support operations overseas, and the US policy rate hikes will encourage residential portfolio investment in Japan, which is likely to underpin the current-account surplus.


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