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Japan’s Registers Current Account Surplus for 4th Month in a Row

Japan logged a current account surplus for the fourth consecutive month in May, as growth in direct investment income outweighed a trade deficit triggered by a rise in fossil fuel imports, government data showed Monday.

The surplus in the balance, one of the widest gauges of international trade, stood at 540.7 billion yen, up 58.1 percent from a year earlier, the Finance Ministry said in a preliminary report. Last month, it surged 100.8 percent.

The income account, which reflects how much Japan earns from its foreign investments, marked a surplus of 1,522.8 billion yen, up 8.6 percent on year, buoyed by higher dividends and profits from securities investments on the back of the depreciation of the yen.

Goods trade saw a deficit of 906.7 billion yen, as imports climbed 9.6 percent to 6,433.6 billion yen, while exports expanded 9.1 percent to 5,526.9 billion yen with the Japanese currency weakening. The trade deficit was the biggest for the month of May since comparable data became available in 1985.

A falling yen usually supports exports by making Japanese firms’ products cheaper abroad and increases the value of overseas revenue in yen terms, but it pushes up import prices.

Import costs have also been rising as demand for natural gas and oil has been growing from power companies for fossil fuel-based power generation as an alternative to nuclear power following the Fukushima nuclear accident in March 2011. Japan depends on imports for more than 90 percent of its energy needs.

The yen slid against the U.S. dollar by 26.8 percent from a year earlier on an average basis and the euro by 28.5 percent, according to the ministry.

via Mainichi [1]

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Alfonso Esparza

Alfonso Esparza [6]

Senior Currency Analyst at Market Pulse [7]
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza