Japan Feb current account balance swings back to surplus

Japan Feb current account balance swings back to surplus

Tokyo: Japan’s current account balance swung back to a surplus in February after marking a record deficit the previous month, as improvement in exports added to steady income gains from overseas investments.

“We could still see some trade deficits in the future, but they will shrink as exports recover due to a pickup in the global economy, led by improvement in the outlook for the US economy," said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management in Tokyo.

“In addition, Japan still has a healthy surplus in the income balance, so the current account balance can avoid swinging to a deficit."

Japan logged a current account surplus of ¥1.1778 trillion ($14.30 billion) in February, finance ministry data showed on Monday, more than a median forecast for ¥1.1485 trillion, after posting a record deficit of ¥437.3 billion in January. It was the highest surplus in five months.

But the February surplus was down 30.7% from a year earlier, smaller than the median forecast of a 32.5% fall in a Reuters poll but signaling recovery in exports may be sluggish due to the slowdown in Europe and emerging Asian economies.

The income surplus was up 3.9%, rising for the 11th straight month thanks to steady gains from overseas investments.

The current account balance, a broad measure of trade and other flows, deteriorated sharply last year as exports slumped and fuel import costs surged after the devastating March earthquake that led to shutdowns in nuclear power plants.

A finance ministry official said the trade balance was expected to remain low for the time being given worries about Europe’s recession and high energy import costs, potentially overshadowing growth in the income surplus.

“We are mindful of the impact of currency moves and crude oil prices on the trade balance. There is no definitive picture about the outlook," the official said.

Japan’s economy is seen headed for a moderate recovery as the yen’s retreat from record highs and solid growth in emerging economies ease the pain on exports.

But any rebound will likely be modest with companies still hesitant to boost output and capital expenditure, keeping pressure on the Bank of Japan to offer additional monetary stimulus in coming months, analysts say.

The BOJ is expected to refrain from easing monetary policy at a meeting that ends Tuesday but many analysts expect it to act at another meeting on 27 April, when it issues new long-term economic and price projections.