Japan Inc.'s Overseas Profits and Tourism Buoy Current Account

(Bloomberg) -- Japan’s current-account surplus widened slightly in August from a month earlier, supported by investment and dividends from overseas and the tourism boom. It was a record surplus for the month of August.

Key Takeaways

Japan’s current-account has been in the black every month since June 2014, reflecting the size of the nation’s overseas investments and its trade surplus, which has been partly the result of a weaker currency. The current account surplus, which is more than 3 percent of the size of Japan’s gross domestic product, was a contributing factor in landing the country on a U.S. Treasury currency watch list.

Economist Takeaways

• “I think the current account surplus will continue because the income balance has had a big surplus and the trade balance is stabilizing in the black,” said Yasutoshi Nagai, chief economist at Daiwa Securities Co. “That’s not a bad thing for an export-driven economy.”
• “It’s good that the overall numbers are improving, but considering the probable effects on the yen and U.S.-Japan relations, the continued current accounts surplus may not be particularly positive,” said Hiroaki Muto, chief economist at Tokai Tokyo Research Center.
• “In terms of U.S.-Japan trading relations, Japan is continuing to pile up a positive trade balance, and it’s easier for Japan to be seen with hostility,” Muto said.