Japan records current account surplus increases in June

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By Harumi Taguchi, Principal Economist, IHS Global Insight

Key Points:

  • Japan’s current account surplus rose 16.5% from previous month to JPY1.6 trillion (USD16 billion) in June on a seasonally adjusted basis, and also rose 80.1% year-on-year (y/y) to JPY974 billion on a non-seasonally adjusted basis.
  • The increase in the trade surplus was attributed to a 2.1%month-on-month (m/m)increase in exports, softening the y/y decline to 9.9%, while a 0.4% m/m decline in imports steepened the y/y decline to 20.2%.


  • Primary income eased by 35% y/y due largely to a decline for income from portfolio investment.

Outlook:

Although Japan’s current surplus reached JPY10.6 trillion in the first half of 2016, topping JPY10 trillion for the first time since the second half of 2007, recent yen strengthening and a softer outlook following the UK’s Brexit vote could limit further improvement in the current-account surplus.

Weak oil prices and sluggish domestic demand underpinned the trade surplus, but yen strengthening will weigh on exports in prices at first and later in volumes.

Negative interest rates will continue to encourage overseas investment and create weak external demand, as well as downside from yen strengthening. Taken together, these will suppress corporate earnings from overseas operations and income from foreign currency assets. These downside drivers will also weigh on service receipts, particularly from tourism.

 

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Japan records current account surplus increases in June

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