Japan’s Current-Account Surplus Narrows Less Than Forecast

Japan’s current-account surplus narrowed less than economists forecast on an increase in overseas investment income, as the strong yen clouds the nation’s prospects for continued export advances.

The gap shrank 21.4 percent in September from a year earlier to 1.585 trillion yen ($20.4 billion), the Finance Ministry said in Tokyo today. The median estimate of 19 economists surveyed by Bloomberg News was for a 31.3 percent decline.

Japanese manufacturers have been restoring operations since a March 11 earthquake disrupted production and supply chains. While corporate sentiment has been improving and overseas shipments are rising, the gains may be temporary as the country’s currency advance weigh on the primary engine of growth for the Japanese economy.

“The current level of the dollar yen is too high for Japanese exporters,” said Junko Nishioka, chief Japan economist at RBS Securities Japan Ltd. in Tokyo. “It’s still too early to judge that the Japanese economy has already shifted to a self-recovery stage.”

The yen traded at 77.62 against the dollar at 11:11 a.m. in Tokyo today. The currency rose to a postwar high of 75.35 on Oct. 31, prompting Japan to intervene in the currency market. The Nikkei 225 Stock Average rose 0.9 percent after Italian Prime Minister Silvio Berlusconi’s offer to resign bolstered optimism a new leader will contain the nation’s debt crisis.

Slower Growth

Japan’s economy probably expanded at an annual 5.8 percent rate in the third quarter, according to the median forecast of 23 economists surveyed by Bloomberg News. A separate survey of economists shows growth may slow after that as the strong yen curbs corporate profits and sentiment just as Europe’s debt crisis erodes demand in Japan’s overseas markets.

Today’s report showed that exports rose 3 percent from a year earlier in September, resulting in a trade surplus of 373.2 billion yen. The income surplus, which includes earnings from overseas trading of equities, bonds and debt securities, rose 12.9 percent to 1.394 trillion yen, according to the release.

“Production has rebounded dramatically since the earthquake, but recently the pace of recovery has been slower, mainly because of the strong yen and slower global growth,” Akira Maekawa, a senior economist at Global Futures & Forex Ltd, said before the report. “There is a strong correlation between Japanese production and Japanese exports.”

The record strength of the yen prompted the finance ministry to intervene in the currency market last month for the first time since Aug. 4. Analysts at Barclays Bank Plc and Totan Research Co. estimate a record 8 trillion yen was sold, based on current account data at the Bank of Japan.

Toyota Motor Corp. President Akio Toyoda this week called on the government to take action to protect jobs threatened by the strong yen. Carlos Ghosn, chief executive officer of Nissan Motor Co., said in an interview in Rio de Janeiro on Oct. 7 that the nation faces a “hollowing out” of its industrial base if the government fails to counter the yen’s ascent.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE