Japan’s December Current-Account Deficit Widens to Record

Japan’s current-account deficit widened to a record in December on soaring imports, adding to Prime Minister Shinzo Abe’s challenges as he tries to drive a recovery in the world’s third-biggest economy.

The 638.6 billion yen ($6.2 billion) shortfall surpassed November’s gap of 592.8 billion yen, the finance ministry said in Tokyo today. The deficit was smaller than the 685.4 billion yen median forecast of 27 economists in a Bloomberg survey. Comparable data go back to 1985.

The yen’s slide and increased demand for foreign energy due to nuclear plants closures are causing imports to outstrip exports, dragging on an economy that is forecast to contract after the government lifts a sales tax in April. A surplus in overseas investment income is staving off the risk of a sustained deficit that could undermine investor confidence in a nation with the world’s largest debt burden.

“A surge in domestic demand ahead of the sales-tax hike is adding to the deficit, a trend that is expected to continue through March,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “Temporary factors are playing a large role in pushing the deficit wider.”

For 2013, Japan posted a current-account surplus of 3.3 trillion yen, the smallest on record. It registered an income surplus of 16.5 trillion yen for the year, the highest in the comparable data.

Japanese shares rose as the yen weakened following U.S. jobs data and amid bets the Federal Reserve will press on with stimulus cuts. The currency was down 0.2 percent against the dollar to 102.50 as of 9:30 a.m. in Tokyo. The Topix index climbed 0.9 percent.

Economy Minister Akira Amari said in parliament last week that the trade deficit stemmed from factors including strong domestic consumption, weak economies in export destinations, and companies shifting production abroad.

Japan’s sales tax will rise to 8 percent in April from 5 percent now, and, pending a decision by the prime minister, to 10 percent in Oct. 2015, as the government aims to raise revenue to improve its finances.

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