Japan’s current-account surplus continues in September; further improvement likely to be limited

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By Harumi Taguchi, Principal Economist, IHS Global Insight

Key Points:

ŸJapan’s current account surplus for September rose 25.4% year on year (y/y) to JPY1.8 trillion (USD17.6 billion) on a non-seasonally adjusted basis, but fell 25.2% month on month (m/m) to JPY1.5 trillion on a seasonally adjusted basis. The y/y increase reflected a larger trade surplus that offset softening in the primary income surplus and a larger service balance deficit.

Ÿ The trade surplus was attributed to steeper declines in imports (-17.5% y/y; due largely to weak oil prices) than exports (-8.3%) on a non-seasonally adjusted basis. On a seasonally adjusted basis, the surplus softened in line with a steeper decline inexports, following a solid increase in the previous month.

The service deficit widened because of greater deficit in other services and because the yen strengthening weighed on travel receipts, although the number of inbound visitors continued to increase (up 19.0% y/y).

ŸThe primary income surplus, the major source of the current account surplus, narrowed by 10.4% y/y or 16.4% m/m, reflecting declines in income from portfolio investment.

IHS Global Insight Views:

Japan’s current account surplus is likely to continue over the near term, but further improvement will likely be limited. The moderate growth outlook for the global economy will suppress the recovery in exports, although weak domestic demand is likely to subdue imports.

Downside from the y/y effect of the yen strengthening will gradually ease and the negative interest rate policy of the Bank of Japan will continue to encourage residential investment abroad. That said, current forex levels will weigh on income from foreign currency assets and overseas operations, as well as spending by visitors from abroad.

 

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Source: The Insiderstories
Japan’s current-account surplus continues in September; further improvement likely to be limited

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