Japan Current Account Rebounds to First Surplus in 5 Months

Japan’s current account rebounded into surplus in February from a record deficit the previous month as income from overseas investments outweighed deficits in trade and services.

The 613 billion yen ($5.9 billion) surplus was the first in five months, the Ministry of Finance reported in Tokyo today. The median forecast in a Bloomberg News survey of 29 economists was for an excess of 618.1 billion yen.

Japanese officials are assessing the strength of the economy after a sales-tax increase on April 1 that is projected to trigger a contraction this quarter. The Bank of Japan is forecast to refrain from adding to its unprecedented monetary easing at a two-day meeting ending today, waiting to see the extent of the blow to consumption.

“The increase in imports from front-loaded demand before the sales-tax hike has worn off,” Koya Miyamae, an economist at SMBC Nikko Securities Inc. in Tokyo, said before the report. “The current-account will stay in surplus for the next few months as domestic consumption weakens and exports are expected to keep rising.”

The Topix index fell for a third day, down 1.7 percent at 10:06 a.m. in Tokyo after technology shares extended their retreat and the yen gained as a haven, weighing on the outlook for exporters. The Japanese currency was up 0.3 percent against the dollar to 102.82.

The current account slid to a record deficit in January, partly due to the effect on trade of the Lunar New Year celebrated in many Asian countries. On a seasonally adjusted basis, the balance was in deficit for a 2nd month.

Energy Imports

The weaker yen and shuttering of nuclear power plants has pushed up energy import costs, causing a 20th straight monthly trade deficit in February. For the current account outlook, Japan needs to watch energy price and foreign exchange moves, Finance Minister Taro Aso told reporters today in Tokyo.

The income surplus is the portion of the current account that includes earnings from overseas trading of equities, bonds and debt securities. This tends to be higher in February and March due to the repatriation of payments before the March 31 end of the fiscal year, according to Tsutomu Saito, an economist at Daiwa Institute of Research Ltd. in Tokyo.

The excess in income is staving off the risk of deficits that could undermine confidence in a nation with the world’s largest debt burden.

All 36 economists in a separate survey conducted March 28 to April 3 forecast the BOJ will today leave unchanged its 60 trillion yen to 70 trillion yen target for annual expansion of the monetary base. Seventy-two percent of the analysts said extra easing would happen before or during July.

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