JAKARTA (TheInsiderStories) – Japan posted a current account surplus of JPY 453 billion (US$4 billion) in December, down 43.1 percent year on year (y/y), on a non-seasonally adjusted basis, marking the sixth consecutive month of declines.
On a seasonally adjusted basis, the surplus rose 8.6 percent in December compared to the previous month to JPY 1.6 trillion. Japan’s current account surplus in 2018 dropped 13.0 percent y/y to JPY 19 trillion.
The continued y/y drop in the non-seasonally adjusted current account largely due to a narrower trade surplus compared to a year ago. That said, the trade balance turned to surplus for the first time in three months. Imports were up 1.6 percent y/y and exports down 2.8 percent y/y.
The primary income surplus also narrowed by 34.7 percent y/y to JPY404 billion, largely because of weaker income from direct investment. The weaknesses in trade balance and primary income were partially offset by a narrower deficit in the service balance.
Harumi Taguchi, principal economist at IHS Market notes, although Japan’ current-account surplus is likely to persist, the trade balance will unlikely show significant improvement over the near term, given that persistent global uncertainties and the repercussions from United States – China trade tensions will probably weigh on exports and the current account surplus.
The yen’ recent appreciation and a softer global economy would mean weaker income from foreign currency assets, which could also weigh on the primary income over the near term.
The December results indicate that net exports will likely make a negative contribution of 2 percentage points to the quarter-on-quarter growth in real GDP in the fourth quarter of 2018, which will be released on February 14.
While the weak external demand is likely to be offset by a rebound in domestic demand following disruption, caused by natural disasters in the third quarter, persistent global uncertainties remain a concern.
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