By Harumi Taguchi, Principal Economist, IHS Global Insight
JAKARTA - IHS Global Insight provides latest updates on Japan’s economy. Following is the key highlights:
- Japan’s current account surplus fell 12.2% in July from the previous month to JPY1.4 trillion (USD14.2billion) on a seasonally adjusted basis, while the surplus rose 8.0% year on year (y/y) to JPY1.9 trillion (US$19 billion) on a non-seasonally adjusted basis.
- While the y/y growth reflected the improvement in trade surplus as decline in imports outpaced drop in exports, the narrower surplus from the previous month on a seasonally adjusted basis was attributed to a decline in surplus in the trade balance (-22.4 % m/m) and the primary balance (-9.4% m/m).
- The yen strengthening and weak external demand weighed on exports, although the m/m decline (-2.7%) was due partially to shortfalls following a solid increase in June. These elements also weighed on income from foreign currency assets, and the surplus in the primary income decreased by JPY523 billion from a year ago (-23.3 y/y) on a non-seasonally adjusted basis, or by JPY144 billion from the previous month (-9.4% m/m) on a seasonally adjusted basis.
IHS Global Insight Views
Japan’s current account surplus is likely to continue over the near term, underpinned by a continued increase in the primary income. The Bank of Japan’s negative interest rate policy is supporting an uptrend in residential investment abroad.
That said, downside from yen the strengthening and soft outlooks for global demand will continue to weigh on exports as well as income from overseas operations and foreign currency assets, limiting further increase in the current account surplus. (*)