Sliding Yen Drives Japan Gains From Trade to Consumers: Economy

Japan rebounded to a current-account surplus and a measure of sentiment matched a record high as a falling yen, rising stocks and stimulus bolster the outlook for the world’s third-biggest economy.

The surplus in February, the first in four months, was 637.4 billion yen ($6.5 billion), the Ministry of Finance said in Tokyo today. That exceeded the 457.5 billion yen median estimate of 24 economists surveyed by Bloomberg News. The Economy Watchers Survey of current conditions rose to 57.3 in March, the cabinet office said today.

The Japanese currency fell today to the lowest level against the dollar since June 2009 after Bank of Japan Governor Haruhiko Kuroda last week pledged to double the monetary base. While a weaker currency helps exporters and boosts repatriated earnings, the government may be on guard against excessive declines swelling import costs and fueling trade tensions.

“It’s likely that the yen will depreciate further given the BOJ’s unprecedented easing,” said Yuichi Kodama, Tokyo-based chief economist at Meiji Yasuda Life Insurance Co. “If the yen weakens too much, that could turn out to be problematic.”

The sentiment index, based on a survey of barbers, taxi drivers and others who deal with consumers, matched the record reached in 2006, when Junichiro Koizumi was prime minister.

The Japanese currency traded at 98.57 per dollar as of 3:41 p.m. in Tokyo after touching 98.85, the lowest since June 2009. On March 14, Koichi Hamada, an adviser to Abe, said that a level of 98 or 100 “would be good.” On Jan. 24, Yasutoshi Nishimura, a deputy economy minister, said that while a yen at 100 wouldn’t be a problem, a level of 110 to 120 would raise import costs.

In Tokyo, Japanese Economy Minister Akira Amari declined to comment today on whether the yen’s fall is too fast.

Hurting Exporters

In Seoul, South Korean Finance Minister Hyun Oh Seok said that the yen’s decline will hurt South Korean exporters and the effects of Japan’s policies on Asian nations should be discussed on the international stage. He added that he’d meet with Japanese Finance Minister Taro Aso in Washington.

Economic releases elsewhere today will include Germany’s February industrial output. In Australia, job advertisements fell in March and an index of builders’ profitability showed that benefits from interest-rate cuts may be yet to kick in.

In Tokyo, the Nikkei 225 Stock Average jumped 2.8 percent.

The Bank of Japan says it aims to lead the nation out of nearly 15 years of deflation. Business and consumer confidence is picking up because of Prime Minister Shinzo Abe’s campaign to pull the nation out of a post-asset-bubble malaise.

Growing Economy

Gross domestic product rose an annualized 0.2 percent in the fourth quarter of last year after two straight contractions.

“A weak currency will cause a permanent surplus in the long run,” Takuji Okubo, chief economist at Japan Macro Advisors in Tokyo, formerly of Goldman Sachs Group Inc., said before today’s report. “After demand adjusts to the new currency level, the export volume will rise and the import volume will drop.”

In the current account data, the income surplus rose 13 percent to 1.4 trillion yen in February from a year earlier, today’s data showed.

The BOJ plans to purchase 7.5 trillion yen of bonds a month and double the monetary base, which includes cash in circulation, in two years, the central bank said in Tokyo on April 4. That exceeded economists’ median estimate of 5.2 trillion yen a month and is the biggest move since quantitative easing began in 2001.

New Phase

The BOJ set a two-year horizon for its 2 percent price target under a “new phase of monetary easing,” as the governor won the backing of a board mostly appointed by the previous government.

Yi Gang, head of China’s foreign-exchange regulator, said in January that he’s concerned about the potential fallout from expanded asset-purchase programs and near-zero interest rates in the world’s advanced economies. South Korea’s Hyun said last month that the yen is “flashing a red light” for his nation’s exports.

In February, the Group of 20 nations refrained from criticizing Japanese policies.

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