Japan's Current-Account Surplus Narrowed in July on Import Bill

By Keiko Ujikane

Sept. 10 (Bloomberg) -- Japan's current-account surplus narrowed for a fifth month in July as record oil prices pushed up the import bill, blunting a rebound in exports.

The surplus shrank 17.3 percent to 1.53 trillion yen ($14.3 billion) from a year earlier, the Ministry of Finance said in Tokyo today. The median estimate of 26 economists surveyed by Bloomberg News was for the gap to narrow to 1.31 trillion yen.

Crude oil has fallen 29 percent since reaching a record $147 a barrel on July 11, providing some relief to companies facing weakening sales at home and abroad. While demand from Asia helped export growth pick up in July, that may not last as slowdowns in the U.S. and Europe infect the rest of the world.

``The economic stagnation in the U.S. is spreading to Europe as well as emerging nations such as China,'' said Kyohei Morita, chief economist at Barclays Capital in Tokyo. ``Should a slowdown in those emerging markets become more notable, that would have a bigger adverse impact on Japanese exporters.''

Falling sales and earnings prompted companies to reduce spending on factories and equipment for a fifth straight quarter in the three months ended June 30, the Finance Ministry said last week. Profits, eroded by costlier energy and raw materials, fell 5.2 percent, the fourth consecutive decline.

The world's second-largest economy probably shrank last quarter at a faster pace than the government initially reported, economists predict revised figures will show on Sept. 12.

Shrinking Economy

Gross domestic product fell at an annual 3 percent pace in the three months ended June, according to the median estimate of 25 economists surveyed by Bloomberg News, more than the 2.4 percent reported last month. That would be the sharpest contraction since 2001, when Japan suffered its last recession.

Imports climbed 18.9 percent in July from a year earlier, today's report showed. Japan gets virtually all of its oil from abroad. Exports rose 8.7 percent, after falling 1.5 percent the previous month, the first decline since November 2003.

China replaced the U.S. as Japan's biggest customer in July, a separate ministry report showed last month. Exports to China climbed 16.5 percent and shipments to the U.S. declined 11.4 percent. Today's trade figures don't include regional breakdowns.

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