JAKARTA (TheInsiderStories) – Japan’s current account surplus declined 43.5 percent compared to last year (YoY) to JPY757 billion (US$7.0 billion) on a non-seasonally adjusted basis in November. However, the surplus rose 18.8 percent from the previous month to JPY1.4 trillion on a seasonally adjusted basis, marking the first increase in seven months.
The continued year-on-year decline in the non-seasonally adjusted current-account surplus reflected the trade balance readings, which recorded a deficit of JPY559 billion versus a surplus of JPY199 million a year earlier.
While mineral fuels continued to boost overall import value, which was up 13.5 percent YoY, export increase softened sharply to 1.9 percent YoY, as the front-loaded demand from Asia ahead of higher tariffs by the United States (US) on imports from China has diminished.
The services trade surplus narrowed largely because of a wider deficit in the transport balance, although tourism-related income improved after dipping following natural disasters. Increased income from direct investment continued to support a rise in primary income, which was up 8.2 percent YoY.
According to Harumi Taguchi, Principal Economist, IHS Markit, Japan’s trade balance is unlikely to show significant improvement over the near term. Although recent weak oil prices could slow growth in imports, persistent global uncertainties and the repercussions of US-China trade tensions are likely to weigh on exports.
The current-account surplus is likely to persist, since primary income, the major source of the current-account surplus, will likely offset the weakness in the trade balance. That said, primary income could soften because of more downbeat outlooks for the global economy, and yen’s recent appreciation could suppress income from overseas assets.
Nevertheless, a softer current-account surplus, which remains below 3 percent of GDP, coupled with a narrower trade surplus with the US could play somewhat positive for Japan ahead of the US-Japan trade talks, expected for early 2019.
Japan’s high current-account surplus as well as its trade surplus with the US have been factors driving the US to put Japan on its currency watch list.
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