Japan's Current Account Surplus Shrinks In July

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Japan's current account surplus narrowed in July from the previous year, mainly due to a fall in the income surplus and the widening of the services deficit, an official report showed Tuesday.

The Ministry of Finance said the current account surplus dropped 19.4% year-on-year to 1.26 trillion yen from 1.57 trillion yen in the previous year. The surplus was also lower than 1.45 trillion yen surplus estimated by economists, although it increased from June's surplus of 1.15 trillion yen.

In July, the surplus in the income account narrowed to 1.25 trillion yen from 1.65 trillion in the previous year. At the same time, the deficit in the services account widened to 288.3 billion yen from 223.7 billion yen in the previous year.

However, the trade surplus showed an improvement, rising to 437.3 billion yen from 307.4 billion yen in the preceding year. Exports dropped 37.6% to 4.55 trillion yen, after growing 8.7% in the previous year. Imports dipped 41.2% to 4.1 trillion yen , after 17.6% growth in the previous year.

The deficit in the current transfers account decreased to 130.3 billion yen from 159.9 billion yen last year.

Meanwhile, the deficit in the financial account narrowed to 1.14 trillion yen from 1.25 trillion year last year. However, the deficit in the capital account increased to 76.9 billion yen from 13.4 billion yen last year.

Earlier in the day, the Bank of Japan released a report, which showed that bank lending climbed 2.5% year-on-year in August, after a 2.8% rise in July. At the same time, the M3 money supply climbed 2% on a yearly basis in August, after 1.9% growth in the preceding month.

Last month, Fitch Ratings affirmed Japan's sovereign rating at 'AA' with a stable outlook to reflect a balance between the country's exceptionally strong external balance sheet and its worsening public finance position, the weakest among the advanced countries.

The Japaneses economy emerged from recession in the second quarter, rising 0.9% sequentially, after a 3.1% fall in the first quarter. The quarterly growth was the first in five quarters. The Bank of Japan's governor Masaaki Shirakawa said last month that economic conditions were showing some signs of recovery, but the outlook was associated with great uncertainty.

The OCED in the meantime said the global recovery could be earlier than expected, but the pace of activity will remain weak well into next year. The Paris-based organization expects Japan's economy to contract 5.6% this year compared to its earlier estimate of a 6.8% drop.

Japan's current account surplus narrowed in July from the previous year, mainly due to a fall in the income surplus and the widening of the services deficit, an official report showed Tuesday. (Market News Provided by RTTNews)