Yesterday here, we described how factors other than trade are impacting the Japanese current account position. Services and incomes were highly influential in the recent Japanese balance of payments performance. But in our desire to highlight often overlooked elements in these developments, we can't fail to take note of the very obvious ones: the recent rapid rise in petroleum prices does make oil imports a major force in many nations' current account trends.

Today's case in point is France, which reported its balance of payments for August. It is dominated by trade, and in the last few months, trade has been dominated by oil imports. The French current account gapped to a €1.5 billion deficit in the month as trade in goods pushed from near balance in July to a €2.0 billion deficit. Both exports and imports contributed to this adverse move: exports fell €1.2 billion and imports increased almost €800 million.

France's current account behavior is unique in including a substantial outflow of current transfer payments every month, lately on the order of €1.5 - 2.0 billion. Despite this, until about a year ago, it has run a fairly consistent current account surplus. Trade has generally had its own modest surplus while services and income together have been more noticeably positive. Most of these trends are still in place. But rising energy imports are putting constant pressure on other trade accounts, while non-energy imports are moving ahead and exports are going up and down erratically. This unsure trade and current account scenario illustrates some of the rationale for the present tension among the world's traders and diplomats.