The Japanese current-account deficit hits another record milestone in December as imports continue to soar. According to the Finance Ministry, the current-account deficit widened from ¥592.8 billion in November to ¥639.6 billion. “Temporary factors are playing a large role in pushing the deficit wider,” said Takeshi Minami, chief economist at Norinchukin Research Institute. The yen futures are only modestly lower, down .11 percent.
What is troubling is that manufacturers have yet to take advantage of the yen’s 23 percent fall in 2013. Policy makers believed the debasement of the yen would help strengthen exports, but a lack of external demand has hampered progress. Increased internal demand accounted for an increase in imports by 15.4 percent opposed to a nine percent gain in exports. In 2013, Japan was able to squeak out a ¥3.3 trillion current-account surplus, the smallest surplus from data available since 1985.
“The current account can remain in surplus, but the surplus will be small. This is an economic headwind that could place pressure on the government and the Bank of Japan to respond,” said Hiroaki Muto, senior economist for Sumitomo Mitsui Asset Management Co.