Japan sees record drop in current account surplus

[1]

Japan's current account surplus halved in the year to March, a record year-on-year fall on higher fuel costs and weak exports, and the nation's smallest surplus since the mid-1990s.

Japan logged a surplus of 7.893 trillion yen ($99.0 billion) in the 2011-12 fiscal year, down 52.6 per cent from a year earlier and the smallest yearly surplus since fiscal 1996, data from the finance ministry showed.

The year-on-year percentage drop was the sharpest since comparable data began in fiscal 1985, according to the ministry.

The latest reading, the broadest measure of Japan's trade with the rest of the world, came as the debt crisis in Europe -- a key market for Japanese exports -- and the soaring yen weighed.

But the nation's surplus in the month of March alone fell by a smaller-than-expected 8.6 per cent from a year earlier, offering a glimmer of positive news.

Japan's March surplus stood at 1.589 trillion yen, bigger than the 1.4 trillion yen surplus that economists had expected.

March exports rose 7.3 per cent from a year earlier while imports soared by 11.9 per cent.

The country's current account balance has taken a hit since the March 2011 quake-tsunami disaster, which pounded the world's third-largest economy.

Nuclear reactor shutdowns following the crisis have left Japan without atomic power for the first time since the 1970s, stoking fears about energy shortages.

Nuclear power had previously supplied about one-third of the resource-poor nation's energy needs.

Imports in the year to March soared 14.0 per cent because of higher oil prices as well as increased demand for fossil fuel to ramp up thermal power generation as last year's tsunami-sparked nuclear disaster spawned anti-atomic sentiment.

Exports over the same period fell 2.8 per cent.

Japanese exports have been inching higher on the back of a recovery in the US economy and a slightly weaker yen from the record highs seen late last year, a positive sign for an economy heavily dependent on overseas demand for growth.

Income from overseas investments also continued rising in March, posting a 10.1 per cent on-year rise.

As Japanese companies shift production overseas due to the relatively strong yen, income has become a key factor in Japan's current account surplus.

"The current account surplus shrank as the balance in goods and services trade turned red despite an expansion in the balance of income," which includes returns on overseas investments, the ministry said Thursday.

Japan posted a current account surplus in February thanks to a stronger US economy, reversing a record deficit in January although the figure was still down 30.7 per cent on-year.

In January, the country logged a record 437.3 billion yen current account deficit, its first monthly dip into the red since January 2009, when it posted a then-record shortfall of 132.7 billion yen at the height of the global financial crisis.

The current account measures the value of a country's imports and foreign investments against the value of its overseas income such as exports of goods and services and returns on overseas investments.