Japanese exports fell 6.3 percent from a year earlier to JPY 6.58 trillion (US$59.52 billion) in December 2019 - Photo: Special.

JAKARTA (TheInsiderStories)Japan’s current account surplus rose by 75.0 percent year on year (y/y) to ¥1.4 trillion (US$16.0 billion) in November, and seasonally adjusted figures also rose by 3.6 percent from the previous month to ¥1.8 trillion, the government data showed Tuesday (01/14).

The y/y increase was due largely to an improvement in the trade balance, which narrowed by 99.5 percent or ¥537 billion to a deficit of ¥2.5 billion, reflecting a 16.6 percent y/y drop in imports, which outpaced a 10.2 percent y/y drop in exports.

An increase in the service balance surplus, up 306.2 percent y/y or ¥123 billion to ¥163 billion, also contributed to a rise in the current account surplus, thanks to a decline in payments for other services (such as research and development services). Primary income rose marginally, by 0.1 percent y/y to ¥1.5 trillion, largely reflecting an increase in income from direct investment.

IHS Markit maintains its view that Japan’s current account is likely to remain in surplus steadily over the near term, but further improvement will be limited. The JPMorgan Global PMI, compiled by IHS Markit, rose to an eight-month high of 51.7 in December, signaling external demand is improving, which is likely to lift Japan’s exports.

That said, the recovery for Japan’s exports will probably only be moderate because of outlooks for modest global economic growth and persistent global uncertainties. Higher oil prices, if geopolitical risks in the Middle East persist, could also weigh on Japan’s trade balance.

“The uptrend of Japan’s investment abroad and stable global financial markets, underpinned by major central banks’ monetary easing policies, will support Japan’s primary income, the major source of Japan’s current account surplus, over the near term,” Harumi Taguchi, principal economist at IHS Markit, said in a statement.

Even though modest upside for the global economy could mean weak increases in income from foreign currency assets and service revenues from tourism, the trade deficit is unlikely to widen enough to turn Japan’s current account to deficit unless oil prices soar to over $100/barrel along with yen’s weakening as in 2013, Taguchi opined.

The October and November results suggest net exports mitigated sluggish domestic demand in the fourth quarter of 2019, although quarter-to-quarter real GDP growth would likely turn negative, he ended.

¥1=US$0.0091

Written by Lexy Nantu, Email: lexy@theinsiderstories.com