Japan's economy gets shot in the arm


Bank of Japan Governor Masaru Hayami and his policy board opted to leave monetary policy alone on Wednesday

By Alex Frew McMillan
CNN Hong Kong

TOKYO, Japan -- Japan got a bit of good economic news on Thursday, its current-account surplus rising for the third month in a row.

The unadjusted surplus rose 19.4 percent in November over last year, hitting 1.12 trillion yen ($8.5 billion).

Japan used to post outsize surpluses, due to its export prowess. But the indicator plummeted as Asia's largest economy slumped into recession.

The current account surplus is the broadest measure of Japan's trade relationship with the rest of the world, measuring the difference between how much Japan shipped to the rest of the world in goods and services against how much it took in.

Now the bad news

The bad news for Japan is that exports are not the reason for the surplus picking back up. They fell yet again, to 3.7 trillion yen, for the eighth down month in a row.

The trade surplus dropped 16.9 percent over last year, to 640.1 billion yen (4.8 billion).

But analysts noted at least that exports appear to have bottomed out. When seasonally adjusted, exports even showed a slight rise.

Still, the main drivers of the November jump in the overall current-account surplus were a sharp drop in imports and yet another rise in income.

"In sum, the current account surplus is backing up sharply as exports are becoming less of a drag, while an uptrend in the income surplus and a shrinking services deficit continue to contribute positively," J.P. Morgan economist Ryo Hino said in a report.

The income surplus measures the difference between bond and dividend payments made by Japan's government and its companies and payments made to Japanese companies by overseas governments and firms.

Overseas investments up

Japanese businesses have stepped up sharply in their buying of overseas investments, particularly U.S. debt such as Treasuries. Analysts blame a lack of profitable investments in Japan.

But the trend may be slowing. After a massive jump in overseas-investment buying for October, the rise slowed in November. Some analysts predict a drop in December.

The unadjusted income balance in November stood at 818.1 billion yen, up 31.7 percent over the year-ago period.

Japan's government reiterated its bleak outlook on Wednesday, in its monthly take on the economy.

It said the yen's recent weakness might help lift exporters back on their feet. It also noted a U.S. recovery may help Japan.

Currency traders say Japanese officials have been encouraging the yen's slide against the dollar, to encourage exports.

But in the past two days, officials have said they are not deliberately "talking the yen down."

"We do not intend to deliberately guide the yen lower, nor have we been taking such a policy," Japan's top financial diplomat, Haruhiko Kuroda, said Thursday.

The yen is trading a little weaker on Thursday, at 131.92 to the dollar, after getting as strong as 131 to the buck on Wednesday.