TOKYO- Japan’s current account surplus widened in March, finance ministry data showed on Thursday, easing some concerns about the country’s balance of payments as hefty gains in investment incomes more than offset surging fuel costs.
Japan’s current account surplus stood at 2.55 trillion yen ($19.68 billion) in March, the data showed, up 69 billion yen and the second straight month the balance has been in the black, the data showed. It compared with economists’ median forecast for a surplus of 1.75 trillion yen in a Reuters poll.
Higher oil import costs offset gains in investment income, with continuing uncertainty due to the Ukraine crisis and COVID-19 pandemic, data showed on Thursday.
The current account data underscored the reliance of Japan’s resource-poor economy on imports of raw materials, which have been boosted by the yen weakening, pushing the trade balance into deficit.
The data also highlights the change in Japan’s economic structure as the country earns hefty returns from its past investments in securities and direct investment overseas, which have replaced trade as the main driver of its current account surplus in recent years.
Many analysts see Japan’s current account surplus persisting for the foreseeable future as long as it is backed by returns on investment overseas.
“It would not surprise me though if the current account swings into the red about 20 years from now,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“Given the possibility that Japan’s ageing population may eventually be drawing on returns from past portfolio investment, we cannot rely on income gains to back the current account surplus forever.”
For the whole of fiscal 2021, Japan ran a current account surplus of 12.6 trillion yen, down 3.6 trillion yen from the previous year, while the trade balance turned to a deficit due to rising fuel costs.
The current account surplus has been shrinking for four fiscal years in a row.
Although a weak yen also helped inflate the cost of imports, its boost to export volumes was not as great as it once was due to an ongoing shift of exporters’ production abroad.
Japan recorded a trade deficit in March that was more than four times wider than market forecasts, as China-bound exports slowed sharply while soaring energy prices raised the cost of imports, adding to economic challenges brought by conflict in Ukraine.
Outgoing trade was restrained by a decline in car exports and a slowdown in the growth of shipments to Japan’s biggest trading partner China, data showed, indicating continuing risk from global supply constraints and the coronavirus pandemic.
The persistent trade deficit highlights the world’s third-largest economy’s vulnerability to soaring import costs.
“Japan’s economy may see a slower recovery if China-bound exports are sluggish,” said Takeshi Minami, chief economist at Norinchukin Research Institute. Exports to China make up over a fifth of Japan’s total shipments in value terms, he said.
Imports soared 31.2 percent in the year to March, Ministry of Finance data showed on Wednesday, above a median forecast of 28.9 percent in a Reuters poll of economists.
That outpaced a 14.7 percent rise in exports, resulting in a trade deficit of 412.4 billion yen ($3.19 billion) – eclipsing the 100.8 billion yen estimated in the poll.
March marked the eighth consecutive deficit, though it was the smallest in five months.
By region, exports to China grew a mere 2.9 percent in the 12 months to March, helped in part by stronger shipments of audiovisual projectors. That was much weaker than the previous month’s 25.8 percent. – Reuters
