Japan's Current
Bloomberg News
Japan posted a fourth straight current-account surplus in May, as income from overseas investments outweighed a trade deficit.
The excess in the widest measure of trade was 522.8 billion yen ($5.1 billion), the Ministry of Finance reported in Tokyo today. This compared with the median forecast of 417.5 billion yen in a Bloomberg News survey of 28 economists.
Imports fell for the first time in 19 months, as consumers cut spending after a sales-tax increase in April, while exports remained sluggish, highlighting how manufacturers can't rely on the yen's slide against the dollar for support. Prime Minister Shinzo Abe's task is to steer the world's third-largest economy through the aftermath of the levy increase.
'Sluggish domestic demand after the sales-tax hike is reflected in the weak imports,' said Koya Miyamae, senior economist at SMBC Nikko Securities Inc. in Tokyo. 'Exports hold the key' to a recovery in Japan's external balance, he said.
Japan's Topix (TPX) index of stocks fell for a second day, following U.S. shares lower, dropping 0.8 percent as of 10:14 a.m. in Tokyo. The yen has strengthened this year after an 18 percent slide in 2013, rising 0.1 percent against the dollar today to 101.75.
Fed Research
While depreciation of a currency typically favors exporters, a decline in the yen would boost the cost of the fuel imports needed by Japanese companies to manufacture products, according to research by economists led by Mary Amiti of the Federal Reserve Bank of New York.
'Yen depreciation drives up the marginal costs of Japanese exporters,' Amiti wrote in the note posted yesterday, with Oleg Itskhoki of Princeton University and Jozef Konings at University of Leuven. This 'results in a smaller share of the depreciation being passed on into their export prices.'
Exports increased 2 percent in May from a year earlier and imports fell 0.4 percent to leave a goods deficit of 675.9 billion yen. A surplus in income from overseas investments of 1.48 trillion yen helped maintain the excess in the nation's account.
Investment income is staving off the risk of sustained deficit that could undermine investor confidence in a nation with the world's largest debt burden.
To contact the reporters on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net; Chikako Mogi in Tokyo at cmogi@bloomberg.net
To contact the editors responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net Andy Sharp, Russell Ward
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