Japan Current-Account Surplus Rises First Time in 18 Months

Japan’s current-account surplus widened from a year earlier for the first time in 18 months, as lower prices of imported energy helped to offset gains in the yen and a global slowdown that has capped exports.

The excess in the broadest measure of the nation’s trade was 454.7 billion yen ($5.8 billion) in August, compared with a 436.3 billion yen surplus a year earlier, the Finance Ministry said in Tokyo today. The median estimate of 24 economists surveyed by Bloomberg News was for a surplus of 421.1 billion yen. In July, the surplus was 625.4 billion yen.

The yen’s nearly 50 percent gain against the dollar in the last five years and territorial tensions with China are weakening Japan’s exports as the International Monetary Fund sees “alarmingly high” risks of a steeper global slowdown. A deteriorating trade position raises the risk of the nation eventually needing overseas funding to service the world’s largest public debt.

“Today’s figure was a temporary blip in a negative trend,” said Takahiro Sekido, a strategist at Bank of Tokyo- Mitsubishi UFJ Ltd. and a former Bank of Japan official. “Japan’s income surplus is still countering its negative trade balance. We should maintain a cautious stance on the current account,” he said.

Energy Prices

Energy prices contributed to a fall in the import bill in August, the government said after the data were released.

Tensions with China over disputed islands in the East China Sea are threatening the $340 billion trading relationship between Asia’s two biggest economies and may lower Japan’s current-account surplus in September, said Junko Nishioka, chief economist at RBS Securities Japan Ltd. and a former central bank official.

Japan’s exports fell 5.8 percent in August from a year earlier, the third-consecutive monthly fall, with shipments to China dropping 9.9 percent.

Carmakers were among those hardest hit, with Mazda Motor Corp. (7261)’s deliveries in China last month falling 35 percent. The dispute also caused cancellations of 40,000 seats on All Nippon Airways Co. flights between the two countries, the airline said last month.

Economic Contraction

JPMorgan Securities Japan Co. said in a report released last week that the dispute may knock 0.8 percentage point off Japan’s gross domestic product in the October-December period and hasten a slide in the current account. The brokerage joins Morgan Stanley and BNP Paribas SA in predicting Japan’s economy will shrink for two consecutive quarters through the end of December.

The Nikkei 225 Stock Average is down about 14 percent from this year’s high in March, and was down 0.5 percent at 10:01 a.m. The yen was at 78.30 per dollar as of 9:26 a.m. in Tokyo, around 4 percent from a postwar high of 75.35 in October last year.

Income from investment abroad, which includes interest payments and dividends on equities and debt securities, has served as a buffer against a deficit in the current-account balance. Japan’s net international investment position of 253 trillion yen was more than 50 percent of nominal GDP at the end of last year, according to Ministry of Finance data.

There are signs of weakness across the Asia-Pacific region, with China yet to reverse its slowdown. The World Bank said this week that China’s deceleration may cut growth in Asia’s emerging economies to an estimated 11-year low this year.

The Bank of Japan (8301) refrained from more easing on Oct. 5 after adding to stimulus in September. The central bank last week downgraded its assessment of the economy.

Japanese companies grew more pessimistic in September, according to the Bank of Japan’s Tankan index, while industrial production in August fell more than economists forecast.

To contact the reporter on this story: Andy Sharp in Tokyo at asharp5@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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