Balance of Payment Japan

In December 2016, Japan's current account was in a surplus of 1669 billion yen after a seasonal adjustment, a moderate fall from 1800 billion yen in November 2016.

Published monthly by the Ministry of Finance. Updated till the month of December 2016 (published on February 8th, 2017).

Recent data trend:

Japan’s current account balance in December 2016 was a surplus of 1669 billion yen after a seasonal adjustment, a moderate fall from 1800 billion yen in November 2016. At an annual rate, the surplus in December is 3.7% of Japan's GDP. In the whole year of 2016, Japan ran a surplus of 20.6 trillion yen, equivalent to 3.8% of its GDP.

On the bedrock of a steady income surplus amounting to well over 1 trillion yen per month, the low energy prices are enabling Japan to run a sizable trade surplus. 

With the new Trump administration in US potentially eyeing Japan as a target for its new mercantilist policy, the large current account surplus may be a liability for Japan in the near term. The bulk of the surplus came not from exports but from the proceed from Japan's investment abroad. However, the large sized current account surplus may be used to argue that yen is undervalued.

Brief overview of “Balance of payment”:

Balance of payment statistics makes an account for all the flow of funds across Japan’s border. In these statistics, financial flows are divided into two large categories. One category is called Capital and Financial Account. Financial transactions that lead to transfers of assets/liabilities are included in Capital and Financial Account. The other category, known as the Current Account, includes other transactions such as trades of goods and services, payment of interest and dividends and transfers such as international aids. 

Historically, Japan usually had a Current Account surplus, mostly stemming from a trade surplus. In recent years, Income Account surplus has become significant factor, while Japan’s trade surplus diminished, even falling to a deficit. Japan’s Current Account surplus reached as large as 4.8% of GDP in 2007, but it has since declined to 0.7% of GDP in 2013. The trade balance turning from a surplus worth 2.4% of GDP in 2007 to a deficit worth 2.2% to GDP is the main cause. We think the current deficits are cyclical, rather than structural. In addition to the post-earthquake public investment demand, BoJ's aggressive monetary policy encouranged consumption and depressed private savings. Japan's current account deficit is the consequence of macroeconomic over-investment/spending. We expect Japan to regain current account surplus as the government starts to rein in its expansionary fiscal and monetary policies.     

For more information, visit the official government page

Source: MoF, JMA

The Next Release Date: March 8th, 2017.

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