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Japan's surplus marks a year of decline

TOKYO: Japan's current account surplus fell for a 12th straight month in January as economists said a long long-awaited recovery in the world's second-biggest economy spurred imports higher.

"The declining trend in the current account surplus since last year is likely to continue," said a Ministry of Finance (MOF) official.

The surplus in Japan's current account, the broadest measure of trade in goods and services, fell 22.8 percent in January from a year earlier to 610.9 billion yen ($5.74 billion), the MOF said.

Exports overall were mostly flat from a year earlier, up 0.9 percent due to an increase in semiconductor exports, offsetting a drop in automobile exports. A 101.4 percent increase in the price of oil was one of the main causes for the rise in imports that shrank the trade surplus. The ministry put the cost of oil at $25.69 per barrel in January, up 126.3 percent from a year earlier.

"There were no real surprises," said James Malcolm, an economist at JP Morgan, adding that the January figure was sharply lower mainly because of the effect of the New Year holiday that had distorted the figure.

The figure came in at the high end of expectations but was expected to continue to shrink.

"What seems to be happening is that the surplus bounced back up in January," he said. "For the rest of this year we expect the surplus to continue to come down on a trend basis, although it could take another month or two to reverse.

"We expect it to come down over the next couple of years, largely on the back of a recovery," he said.

Economists have said consumer demand the biggest engine of growth in Japan's economy remains extremely fragile and any self-sustaining recovery after a decade in the economic doldrums will depend on stronger consumption.

Some economists, however, have forecast a more extreme scenario, possibly even a deficit within a few years, as a recovery boosts imports and global demand for Japanese goods weakens. Imports are climbing since a high yen makes them cheaper, and also due to gradually increasing demand in Japan on the back of the slow-paced economic recovery.

The data showed the 12th straight monthly fall in the current account surplus from year-earlier levels.

The trade surplus fell 27.9 percent to 662.6 billion yen, the ministry said. That was the 10th consecutive decline.

The numbers came on the heels of a decline in the current account in 1999, which was the first in three years, reflecting higher prices abroad and greater demand at home.

Economists say Japan's trade surplus remains on a declining trend because of the high yen, which makes Japanese exports of finished goods less competitive overseas.

Exports to Asia, however, have been increasing due to the faster pace of economic recovery in the region. -Reuters