Japan logs biggest current account surplus since 2008, economists divided over true health of economy

Japan posted its biggest current account surplus since 2008 in March at 2.80 trillion yen (23.3 billion U.S. dollars) before seasonal adjustment, as a weaker yen, falling oil prices, increased investment from overseas and a drop in import costs contributed to an improved trade balance, the finance ministry said Wednesday.

Japan's current account surplus came in well above median economists' expectations for a surplus of 2.1 trillion yen, with economists here stating that energy imports costing less because of the global oil glut, increased trade from tourists attracted to Japan by the weak yen, helped to offset lackluster spending by domestic corporations and consumers.

Economists noted that Japan hasn't regularly posted a current account surplus in excess of 2 trillion yen since the global financial crisis and said the balance is likely to stay in the black in the foreseeable future although will not likely widen more as March typically sees a spike in the surplus due to seasonal factors.

But while most leading economists were in agreement that the government and the central bank's reflationary efforts are starting to yield some positive results and has seen the yen driven down by nearly 30 percent against the U.S. dollar since Prime Minister Shinzo Abe, himself a fiscal hawk, took office in December 2012, and the nation's bill for oil imports has also helped the surplus by dropping 751 billion yen in March compared with a year earlier, consensus on the true health of the economy remained divided.

"The current account is improving in all aspects. It is definitely positive for the economy as it means that Japan is accumulating wealth from abroad," said Minoru Nogimori, an economist at Nomura Holdings Inc., but other experts pointed to the fact that while certain figures were encouraging for the broader economy, exports remained sluggish.

"Some people will point to the current account balance recovering to pre-Lehman shock levels as a sign that Japan is recovering, but that is not quite true. While the weaker yen has helped boost the yen-value of exports, export volumes had still not significantly recovered, and much of the current account balance surplus was being produced by the income account," said Takuji Okubo, chief economist at Japan Macro Advisors.

"It would be difficult to improve Japan's current account balance further because Japan cannot produce more with the country' s labor market already so tight," he added.

But the finance ministry made particular note of the increase in tourists coming to Japan as supporting the nation's balance sheet and coupled with a jump in revenue from intellectual property helped elevate the services balance back into the black for the first time since comparable data became available in 1985.

The finance ministry said of the current recording period's balance that the primary income surplus of 2.3 trillion yen was the most in any month since 1985.

In fiscal 2014 the nation's current account surplus widened more than five times to 7.81 trillion yen, the ministry also said Wednesday, marking the first increase in four years owing to many of the same factors that contributed to March's biggest surplus in seven years.

The surplus widened by 6.34 trillion yen from a year earlier, the ministry said in its preliminary report, highlighting an improving trade balance as economies overseas started to recover in the year and the yen's depreciation helped boost a turbulent export market, although saw import costs rise.

The ministry said that the surplus in the primary income account, which pertains to earnings from foreign investments, came in at 19.14 trillion yen in the last fiscal year ended March 31, the highest since 1985 and marking a rise in the income account for the sixth successive year.

In the same period the travel balance of payments marked a surplus of 209.9 billion yen, owing to increased tourism to Japan, as the weaker yen gives overseas travelers more purchasing power here, with the balance reversing a deficit of 530.4 billion yen logged for the previous year, the finance ministry also said.

Japan's current account surplus is one of the broadest measure of its trade with the rest of the world and the data is keenly eyed by the Bank of Japan and the finance ministry ahead of new potential policy changes or monetary easing or tapering measures.

In Japan the current account surplus increases the nation's net foreign assets by the corresponding amount, and a current account deficit does the reverse. Both the Japanese government and private payments are included in the calculation and it is called the current account because goods and services are generally consumed in the current period. Endi