By Harumi Taguchi, Principal Economist, IHS Global Insight
Key Points:
Japan’s current-account surplus for November fell 6.7% from the previous month to JPY1.8 trillion (USD15.6 billion) on a seasonally adjusted basis but rose 28.0% year on year (y/y) to JPY1.4 trillion on a non-seasonally adjusted basis. The y/y increase reflected a swing in the trade balance to a surplus of JPY313 billion from a deficit of JPY304 billion a year ago, offsetting lower primary income.
Exports increased by 4.2% month on month but decreased by 0.8% y/y, while imports rose 3.4% m/m but declined 10.7% y/y.
While the service balance recorded a surplus of JPY73.8 billion on a non-seasonally adjusted basis, the seasonally adjusted service balance turned to a deficit of JPY49.5 billion, which was a major factor behind the softer current-account surplus on a seasonally adjusted basis.
Primary income remained the major source of the current-account surplus, but softened due largely to weaker income from direct investment.
IHS Global Insight Views:
Japan’s current-account surplus is likely to continue over the near term, but the continuity of improvement in external demand will be a key factor for further improvement. The weak yen will help lift service income, as it could boost growth in the number of visitors from abroad, and also increase primary income from foreign currency assets, along with driving greater residential investment overseas.
However, the improvement in the trade balance could be offset by higher oil prices and improved demand for resources along with export-led growth in production, although domestic demand is likely to remain modest.