Japan's Current-Account Surplus Narrows by a Record

By Keiko Ujikane

Aug. 13 (Bloomberg) -- Japan's current-account surplus narrowed by a record in June as exports fell and higher oil prices pushed up the import bill.

The surplus shrank 67.4 percent to 493.9 billion yen ($4.5 billion) from 1.52 trillion yen a year earlier, the Ministry of Finance said in Tokyo today. The median estimate of 29 economists surveyed by Bloomberg News was for the gap to decrease to 494.7 billion yen.

Rising energy and raw material costs are taking a toll on sales abroad as well as spending by companies and consumers at home, threatening the nation's longest postwar expansion. Japan's economy shrank last quarter, bringing the country to the brink of its first recession in six years, a separate report showed today.

``Japan has been in an economic downturn since the end of last year and the downturn may last 12 to 18 months,'' said Susumu Kato, chief economist at Calyon Securities in Tokyo. ``Both domestic and external demand may remain weak.''

Japan's economy shrank an annualized 2.4 percent in the three months ended June 30 after expanding a revised 3.2 percent in the first quarter, the Cabinet Office said today in Tokyo.

Exports fell 1.5 percent in June from a year earlier, the first decline since November 2003, today's report showed. Imports climbed 17.8 percent to a record 6.59 trillion yen. Japan imports virtually all of its oil. Crude oil surged to a record $147.27 a barrel on July 11.

Higher import costs are being reflected in wholesale prices, which rose 7.1 percent to a 27-year high in July from a year earlier, a central bank report showed yesterday.

The narrowing of the surplus was limited by returns on investments made overseas.

The income surplus, the difference between money earned abroad and payments made to foreign investors in Japan, gained 29.9 percent to 593.4 billion from a year earlier, according to today's report.

The current account tracks the flow of goods, services and investment income between Japan and its trading partners. It includes trade not shown in the customs-cleared balance.

To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net