Japans current account swings back to black on overseas investment

By Tetsushi Kajimoto

TOKYO (Reuters) – Japan‘s current account swung to a surplus in February, reflecting hefty returns on securities investments and easing some concerns about any weakening of the country’s purchasing power, after the previous months record deficit.

The current account surplus stood at 2.1972 trillion yen ($16.59 billion) in February, smaller than a 2.5357 trillion yen surplus forecast by a Reuters poll of 16 economists. That followed the prior months 1.9893 trillion yen deficit, which was caused by effects of the Chinese New Year holidays in January.

In February, a weak yen and rises in global interest rates helped drive the amount of primary income gains from Japanese investments overseas to a record amount, a MOF official said.

The income surplus stood at 3.4407 trillion yen, more than enough to offset the trade deficit of 604.1 billion yen, the data showed.

“As a weak yen and commodity price hikes run their course, imports will be on decline, which will cause trade deficits to narrow,” said Kenta Maruyama, economist at Mitsubishi UFJ Research & Consulting.

“Recovery in inbound tourism will also help service deficit to contract. As a result, current account surplus will expand gradually from now on,” he said.

That reflected the trend in which the country increasingly earns income from capital parked abroad rather than sales of goods and services.

The data underscores the pain that high energy costs and a weak yen were inflicting on Japan‘s economy, the world’s third biggest, which relies heavily on imports of fuel and raw materials.

Japan‘s position as an export powerhouse has also waned in recent years, in part because companies have moved production overseas, making overseas investment a pillar of the country’s earning power.

($1 = 132.4400 yen)

(Reporting by Tetsushi Kajimoto; Editing by Sam Holmes)