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Japan's February Current Account Surplus Widens 10% (Update6)

Japan's February Current Account Surplus Widens 10%

April 11 (Bloomberg) -- Japan's current account surplus unexpectedly widened in February as income from overseas investments rose and earnings from royalties increased.

The surplus expanded 10 percent to 1.66 trillion yen ($15.4 billion), seasonally adjusted, from 1.51 trillion yen in January, the Ministry of Finance said in Tokyo today. The median forecast in a Bloomberg News survey of 11 economists was 1.39 trillion yen.

A widening surplus may help Japan's economy, the world's second-largest, sustain a recovery from its fourth recession since 1991 as exports slow. Income from U.S. fixed-income investments may rise further as the Federal Reserve raises interest rates.

``Overseas income from investments has kept the surplus at a high level,'' said Azusa Kato of BNP Paribas Securities Japan Ltd., one of three economists who forecast a larger surplus. Investment income ``will probably stay high.''

The yen pared losses after the report. Japan's currency traded at 108.32 to the dollar at 3:36 p.m. in Tokyo from as low as 108.52. The yen was at 108.23 on April 8 in New York.

Income from overseas investments rose 6.3 percent in February from the previous month to 901.7 billion yen. Japanese investors owned $701.6 billion of U.S. Treasury notes in January, according to Bloomberg data.

Federal Reserve policy makers raised the benchmark interest rate a quarter-point to 2.75 percent on March 22, the seventh increase in as many meetings. Since then the dollar has climbed 2.6 percent against Japan's currency, boosting the yen value of returns on U.S. investments.

Oil Prices

Easing oil prices may also contribute to wider surpluses, said Peter Morgan, the Tokyo-based chief economist at HSBC Securities Japan Ltd., who forecast the surplus would widen to 1.72 trillion yen.

Crude oil on the New York Mercantile Exchange rose to $58.28 on April 4, the highest since trading began in 1983. Since then it has fallen, trading at $52.94 a barrel at 10:16 a.m. in Singapore. In February, the average price rose to $48.06 a barrel, 2.6 percent higher than in January.

The IMF estimates oil prices will average $51.90 this year, compared with a forecast in September of $37.30 and in March for $46.50.

The services deficit in February shrank 29 percent to 262.1 billion yen from the previous month after companies earned an unadjusted net 68.9 billion yen on royalties, compared with a deficit of 45.2 billion the previous month. Japanese tourists also spent less money abroad.

Fading export growth helped push Japan into recession last year in the second quarter. The economy recovered in the fourth quarter, expanding at a 0.5 percent pace.

Digital Cameras

Japan's seasonally adjusted trade balance in February shrank 9.3 percent as exports fell faster than imports, today's report showed. Exports slid 4.2 percent to 4.8 trillion yen, and imports fell 2.7 percent to 3.73 trillion yen.

Konica Minolta Holdings Ltd., a maker of digital cameras and office equipment, on March 17 cut its profit estimate for the year ended March 31 by more than two-thirds to 23 billion yen because demand was weaker than expected.

``Our digital camera business is in the red,'' Kiyofumi Tanida, a general manager at Konica Minolta, said at a press conference after it released its earnings estimate. ``Prices for our cameras have fallen about 4 percent from a year ago.''

Digital-camera shipments by Japanese companies, including Sony Corp. and Canon Inc., which account for at least four-fifths of the world's output, dropped 1 percent in February because of slowing overseas sales in Europe and Asia.

``The prolonged adjustment in inventories in the high tech sector is weighing down on exports,'' said Eishi Yokoyama, an economist at AIG Global Investment Corp. ``Exports are expected to pick up later this year, but it's not going to be full-blown.''

To contact the reporter on this story:
Tim Kelly in Tokyo
or at [e-mail]

To contact the editor responsible for this story:
Chris Wellisz in Tokyo [e-mail]


LINK: http://www.bloomberg.com/apps/news?pid=10000101&refer=japan&sid=aDE73AKPx88c