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Economy in Brief

Japan's Current Account Balance Improves Sharply In June
by Louise Curley August 10, 2009

Japan's Current Account increased sharply, outpacing expectations, in June to 1,799 billion yen from 1, 016 billion Yen in May.  It was moreover,  the fifth successive month of increase and the year over year change is now above the year ago figure for the first time since November, 2007.  The first chart shows the current account and its major components--Goods and Services, Income and Current Transfers. (The Chart shows the data in 100 millions of Yen, while the table below and text figures are in billions of Yen.)

The balance of Trade in Goods and Services accounted for the largest part of the June increase in the current account balance.  The positive balance on goods increased by 333 billion Yen while the negative balance on services decreased by 172 billion Yen, resulting in a 505 billion yen improvement in the balance on Goods and Services.

The balance on Income has become more important than the balance on Goods in the Current Account Balance since the second quarter of 2005 as can be seen in the second chart.  This reflects the growth of Japan's net international investment position as Japans direct and portfolio investments abroad have generally exceeded foreign direct and portfolio investments in Japan.  The third chart shows Japan's net international investment position. The June increase in Income was 200 billion yen, smaller than the goods contribution, but the actual balance of 1,219 billion Yen remains well above the goods balance of 735 billion Yen.  The decline in the income balance of 244 billion Yen from a year ago is due largely to the decline in returns on portfolio investments.

Finally, the negative balance on current transfers declined in June by 78 billion yen, also contributing to the improvement of the current account balance. 

JAPAN Jun 09 May 09 Jun 08 M/M Dif  Y/Y   Dif 2008  2007 2006
Current Account (SA Bil.Yen) 1799 1016 1663 783 335 16425 25054 19965
  Goods and Services 658 153 120 505 538 1916 10088 7250
    Goods 735 402 347 333 388 4016 12564 9404
     Services -77 -249 -227 172 150 -2100 -2475 -2154
  Income 1219 1019 1463 200 -244 15876 16326 13943
  Current Transfers -78 -156 -119 78 41 -1367 -1360 -1233

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