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Japan's current account surplus rose in March

Japan's current account surplus in March posted its first gain in three months on the back of strong overseas investment income, but exports, a key driver for economic growth, continued to lag rising imports, official figures showed yesterday.

The current account surplus, which measures the flow of goods, services and investment income and other financial transfers, rose 0.5 percent from a year earlier to ¥1.85 trillion (US$17.5 billion), the finance ministry said.

For the year to March, the current account surplus increased 5.8 percent to a record ¥18.29 trillion with the trade surplus up 2.0 percent at ¥13.56 trillion.

Exports alone rose 10.2 percent to a record ¥58.83 trillion, while imports grew even faster at 13 percent to ¥45.27 trillion, also a record, during the year.

In March alone, the current account surplus marked the first year-on-year rise in three months, mainly due to a gain in income from Japanese investments in foreign bonds and stocks, the ministry said.

"Dividends and interest payments from Japanese companies' investments in foreign bonds and stocks rose sharply in the month, lifting the overall current account surplus," a ministry official said.

On a net basis, Japanese investment income jumped 23 percent to ¥838 billion, while the return on direct investment income, which includes profits of Japanese subsidiaries overseas, grew 4.4 percent to ¥166.2 billion in March.

Analysts said the overall gain in the current account surplus may not be sustainable given a prolonged inventory adjustment in the information-technology sector, rising commodity prices and growing uncertainty over Chinese and US economic growth.

"Due to the prolonged inventory adjustment in the IT sector and worries over a slowdown in economic growth in China and the US, Japan's exports are most likely to stagnate at least" for a while through the summer, said Daiwa Institute of Research senior economist Junichi Makino.

The March trade surplus alone shrank 8.5 percent to ¥1.23 trillion.

Exports grew 6.5 percent to ¥5.51 trillion for a 16th consecutive monthly gain, while imports jumped 11.8 percent to ¥4.28 trillion, up 13 months in a row, as soaring oil prices continued to boost the value of imports.

"The sharp rise in imports is solely due to high oil prices. It does not reflect the strength of domestic demand," said Tomomichi Akuta, a senior economist at UFJ Institute.

The average oil price stood at US$42.51 a barrel in March, up 34.7 percent from a year earlier, the finance ministry said.

Growth in exports, which account for some 10 percent of Japan's GDP, is expected to remain slow amid sluggish demand for digital products in Asia, analysts said.

"Since late last year, demand for high-tech products such as personal computers, mobile phones and semiconductors has remained weak, particularly in Asia," Akuta said.

"In the face of slow demand in Asia and a slump in the European market, Japanese exports will likely remain flat in the months to come," he said.
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