Japan Current Account Slides Into Deficit Ahead of Stimulus

Japan posted a larger-than-expected current account deficit as exports fell, underscoring the challenges facing Prime Minister Shinzo Abe as he prepares a stimulus package to pull the economy out of a recession.

The shortfall in the widest measure of the nation’s trade in November was 222.4 billion yen ($2.5 billion), the Ministry of Finance said in Tokyo today. The median estimate of 19 economists surveyed by Bloomberg News was for a 17.1 billion yen deficit.

The government will announce economic stimulus measures today, with Nomura Securities Co. estimating that the spending will increase gross domestic product by 0.8 percentage point in the year starting in April. Exporters may receive a boost this year from a yen that has fallen around 10 percent against the dollar since mid-November.

“The trade numbers are weak now because of the global slowdown last year,” Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo, said before the report. “The Abe administration may keep on pushing for a weaker yen.”

The currency slid through 89 per dollar after the data, before trading at 89.27 as of 8:54 a.m. in Tokyo, the weakest since June 2010.

The current account is the sum of the balance of trade, earnings on investments and cash transfers. November is traditionally a weak month for Japan’s account because smaller dividend payments reduce income from overseas investments, according to Maruyama. Today’s deficit is the first since at least 1985 in months other than January, when seasonal trade factors drag down the account.

Trade Deficit

The account was also dragged down by a 953.4 billion yen trade deficit in November, the third-largest on record.

Japan’s gross domestic product shrank at an annualized 3.5 percent pace in the third quarter of last year after contracting in the three months through June, meeting the textbook definition of a recession.

Nomura raised its real GDP growth forecast for the fiscal year starting April 2013 to 1.8 percent from 1 percent, according to an e-mailed research note dated Jan. 9. The note cited the stimulus package and improved export prospects as the reason for the upgrade.