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Japan's huge current account surplus shrinks

TOKYO: Japan announced on Monday that its current account surplus narrowed in the first half of this year, and economists said the data showed the nation's stubborn surplus was now definitely shrinking.

The surplus in the current account -- the broadest measure of trade in goods and services -- narrowed to $61.33 billion in the first six months of this calendar year from a surplus of $68.37 billion in the same period a year ago, the Finance Ministry said.

The merchandise trade surplus narrowed to $71.49 billion in the January-June period from a revised surplus of $71.64 billion a year earlier. The figures were not adjusted for seasonal factors.

In June alone, the current account surplus fell to $10.94 billion from a revised $11.14 billion a year earlier, a sharper drop than economists had generally been expecting. This compared with a surplus of $8.94 billion in May.

The trade surplus rose to $14.00 billion in June from a revised $13.03 billion a year earlier, and rose from $10.01 billion in May.

The finance ministry and private economists said the data showed that a shrinking trend in the contentious current account surplus had now been firmly established.

"The falling trend in the (current account) surplus has definitely been confirmed," said Ronald Bevacqua, an economist at Merrill Lynch Japan Inc.

The June number surprised most economists, who had expected the surplus to widen on the back of growth in merchandise exports. They had expected an average $11.46 billion surplus in June, with forecasts ranging from $10.5 billion to $12.3 billion.

"The overall (June) number was a surprise. Probably the biggest variable was the services account and, in particular, foreign travel," Bevacqua said.

"Probably in that month, Japan ran a larger travel deficit -- that is there was more foreign travel by Japanese than expected. That's why the number came in lower than most analysts, including us, had anticipated," Bevacqua said.

The yen's sharp rise in June pushed up the number of Japanese who travelled abroad in that month by 14.3 percent from a year earlier, leaving the travel balance in deficit by $2.8 billion, up from $2.4 billion a year earlier.

Private economists had predicted that the January-June current account surplus would fall year-on-year, mainly because exports in the first quarter slowed due to damage to port facilities caused by the Kobe earthquake in January.

A Ministry of Finance official, briefing reporters after the release of the data, said the current account surplus remained on a declining trend.-Reuter haa