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Business News/ News / World/  Japan’s December current-account deficit widens to record
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Japan’s December current-account deficit widens to record

The 638.6 billion yen ($6.2 billion) shortfall surpassed November's gap of 592.8 billion yen

For 2013, Japan posted a current-account surplus of 3.3 trillion yen, the smallest on record. Photo: Yuriko Nakao/BloombergPremium
For 2013, Japan posted a current-account surplus of 3.3 trillion yen, the smallest on record. Photo: Yuriko Nakao/Bloomberg

Tokyo: Japan’s current-account deficit widened to a record in December on soaring imports, adding to Prime Minister Shinzo Abe’s challenges as he tries to drive a recovery in the world’s third-biggest economy.

The 638.6 billion yen ($6.2 billion) shortfall surpassed November’s gap of 592.8 billion yen, the finance ministry said in Tokyo on Monday. The deficit was smaller than the 685.4 billion yen median forecast of 27 economists in a Bloomberg survey. Comparable data go back to 1985.

The yen’s slide and increased demand for foreign energy due to nuclear plants closures are causing imports to outstrip exports, dragging on an economy that is forecast to contract after the government lifts a sales tax in April. A surplus in overseas investment income is staving off the risk of a sustained deficit that could undermine investor confidence in a nation with the world’s largest debt burden.

“A surge in domestic demand ahead of the sales-tax hike is adding to the deficit, a trend that is expected to continue through March," said Takeshi Minami, chief economist at Norinchukin Research Institute. “Temporary factors are playing a large role in pushing the deficit wider."

For 2013, Japan posted a current-account surplus of 3.3 trillion yen, the smallest on record. It registered an income surplus of 16.5 trillion yen for the year, the highest in the comparable data.

Japanese shares rose as the yen weakened following US jobs data and amid bets the US Federal Reserve will press on with stimulus cuts.

Economy minister Akira Amari said in parliament last week that the trade deficit stemmed from factors including strong domestic consumption, weak economies in export destinations, and companies shifting production abroad.

Japan’s sales tax will rise to 8% in April from 5% now, and, pending a decision by the prime minister, to 10% in October 2015, as the government aims to raise revenue to improve its finances. BLOOMBERG

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Published: 10 Feb 2014, 09:10 AM IST
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