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Japan current account surplus dives

TOKYO: Japan's surplus in its current account, the broadest measure of trade in goods and services, fell by just under 39 percent in February, providing further proof that the contentious trade gap is shrinking.

The nation's current account surplus dropped to 745.9 billion yen in February from 1.22 trillion yen a year earlier, the Finance Ministry said on Wednesday. At an average of around 106.35 yen to the dollar during February, the current account surplus was $7.01 billion in dollar terms.

The surplus in merchandise trade alone fell to 900.9 billion yen from a revised 1.30 trillion yen in the same month a year earlier, marking 15 straight months of decline on a year-on-year basis. At the average dollar-yen rate for the month, this would mean a merchandise trade surplus in February of $8.47 billion.

The Finance Ministry welcomed the figures, saying they showed that the surplus - a source of trade friction particularly with the United States - was firmly on a downward trend and that the pace of shrinkage was faster than anticipated.

Analysts said they expected the pattern of decline to continue in coming months.

"The trend of Japan's external surplus adjustment is very positive. I think over the next three to four months, the Japanese current account surplus and trade surpluses will continue to decline at the pace of between 25 percent and 30 percent compared to year-ago levels," Jesper Koll, chief economist at J.P. Morgan in Tokyo, told Reuters Financial Television.

Japan posted a current account deficit of 1.9 billion yen in January, with the trade surplus totalling 263.4 billion yen. At an average of around 104.28 yen to the dollar during January, the current account deficit for January in dollar terms was $18.2 million. January can be an anomalous month because of the New Year holiday.

The Finance Ministry recently started to give trade figures only in yen terms whereas it had previously given the figures in both dollars and yen.

Economists polled by Reuters had anticipated the February current account surplus would be within a range of 575 billion to 826 billion yen. The trade surplus had been expected to range from 863 billion yen to 950 billion yen in February.

Growth in imports remained much bigger than that in exports, contributing to the continued fall in the current account surplus, they said.

Economists said the continuing drop was likely to keep the yen weak against the dollar for some time. "It's quite likely that we are going to see the yen-dollar snap to 115 and 118 yen as further current account and trade surplus reductions come through," Koll said. The dollar was trading at around 108 yen in Tokyo on Wednesday.

The current account balance of payments comprises exports and imports of actual goods as well as payments and receipts for so-called "invisible" items such as shipping, banking and tourism.-Reuter